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California Marriage law - inheritance and community property

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#1
Hello,
I married last year in 2017. Spouse and I live in California and were married here. Several months after we were married my father passed away and I inherited a portion of his estate along with my sister and his wife at the time. I understand under California law - inheritance is not considered "community property" even when acquired during the course of the marriage as long no "commingling" or "transmutation" occur. I have it all in seperate accounts, none is joint accounts. However, I'm getting confused on one detail...

For example, if we purchase a home together...I will most likely use a portion of my inheritance to contribute to a downpayment. Does that action now make my ENTIRE inheritance "community property" or just the portion I used for a downpayment. I'm ok with the latter since I am actively deciding to use a portion to contribute. But I don't want subject the entirety of my inheritance to that "commingling"/"transmutation".

Also, one possibly legal plot twist - she not a U.S. Citizen. She is a foreign national at the current moment. Not sure if that changes anything.
 


Taxing Matters

Overtaxed Member
#2
For example, if we purchase a home together...I will most likely use a portion of my inheritance to contribute to a downpayment. Does that action now make my ENTIRE inheritance "community property" or just the portion I used for a downpayment.
Only that portion that you contribute to the house ends up community property. The remainder of the funds you hold in the separate account remains separate property so long as you can trace it as separate property. So be careful what you do with it. If you do something with it that results in being unable to trace it back as separate property you will have a problem.
 
#3
Thanks for the reply.
If you do something with it that results in being unable to trace it back as separate property you will have a problem.
What do you mean by this? In what case would I be unable to trace it? Examples?

Also, another issue I have read about. Once I start getting a paycheck, income which is considered community property in CA...what if I want to contribute a portion to my seperate accounts? Does that constitute "commingling" or "transmutation"?
 

Taxing Matters

Overtaxed Member
#4
What do you mean by this? In what case would I be unable to trace it? Examples?

Also, another issue I have read about. Once I start getting a paycheck, income which is considered community property in CA...what if I want to contribute a portion to my seperate accounts? Does that constitute "commingling" or "transmutation"?
The example you provided is exactly one that can result in being unable to trace the funds in the account. Once you start mixing in community property funds in the same account it becomes impossible over time to tell which funds in it are separate funds and which are not because money is fungible. And once it becomes impossible to accurately trace the funds you end up with the whole thing being treated as community property, in effect transmuting whatever separate funds were there into community property.

That pay check is community property and ought to be deposited in an account that has no separate funds; i.e. one that only has community funds it. It doesn't have to necessarily be a joint bank account. You could open a separate account under your name to put the paychecks into. Just understand that the account with the wages/salary in it is community property regardless of whether your spouse's name is on it or not.
 
#5
Right, that makes sense. Thanks for the clarification.

To summarize: any funds I put into joint accounts/other things (ex. down payments) from my inheritance will be community property. Going the other way - any wages or income I make that I put into my inheritance accounts will likely result in making the entire inheritance subject to community property.

Are there any other common pitfalls I should be aware of?
 

LdiJ

Senior Member
#6
Right, that makes sense. Thanks for the clarification.

To summarize: any funds I put into joint accounts/other things (ex. down payments) from my inheritance will be community property. Going the other way - any wages or income I make that I put into my inheritance accounts will likely result in making the entire inheritance subject to community property.

Are there any other common pitfalls I should be aware of?
Nope, those are the main ones.
 

not2cleverRed

Obvious Observer
#7
nshields: To follow up my other thread. Has anyone had any experience with postnuptial agreements in California?

I was reading about them on some general information websites. It appears they may not be particularly valid in California. But I keep seeing contradicting information in other places (i.e. law firm websites offering the service). They make it seem legitimate.


Yeah. D-I-V-O-R-C-E.

It's an agreement, it's post-nuptial...
 
#8
Tried to post a new thread, but was told to post it here.

Has anyone had any experience with postnuptial agreements in California?

I was reading about them on some general information websites. It appears they may not be particularly valid in California. But I keep seeing contradicting information in other places (i.e. law firm websites offering the service). They make it seem legitimate.


Yeah. D-I-V-O-R-C-E.

It's an agreement, it's post-nuptial...
I don't understand your response. Clarify if you can.
 
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