Most Californians who are considering divorce understand that assets acquired during the marriage must be divided equally between the spouses. One of the important exceptions to this rule is the so-called right to reimbursement. This rule states that if a spouse contributed money or other property to acquire a marital asset, that spouse is entitled to reimbursement for the payment or contribution separate from the division of property in the marital estate.
The contribution for which reimbursement is sought must come from a source of funds that can be separately identified as belonging to the spouse seeking reimbursement. The amount that is reimbursed does not bear interest, is not adjusted for inflation and may not exceed the net value of the property at the time of division.
“Contributions to the acquisition of . . . property” is defined as down payments, payments for improvements and payments that reduce the principal due on any loan used to acquire the property. Interest on the principal and charges such as insurance, taxes and maintenance are not included in the amount subject to reimbursement. A spouse is likewise entitled to reimbursement for any contribution made to the separate property of the other spouse.
The right to reimbursement can be waived in writing, and this possibility often becomes the subject of intense negotiations in drafting a prenuptial agreement. A party who has significantly more assets than the other spouse usually resists any request to waive the right of reimbursement because that person usually makes a greater contribution when acquiring property. Any questions about whether to execute a waiver of the right to reimbursement or about property division in general should be directed to an experienced family lawyer for review.
Source: FindLaw, “California Code, Family Code – FAM § 2640,” accessed on March 19, 2018