Parental "Gift" in divorce

[4AI]

What is the name of your state? CA

My parents gave ME, a large sum of money to help with the purchase of our home.
Although their names are not on the deed, the understanding has been that this was an investment,
rather than a present, to never be returned.
It was very well received by my wife at the time, who claimed that she intended to return the funds if we ever sold the house.
This money was recorded during escrow as a "gift".
In case of divorce, does my wife have rights to this money.
The home is under both names, and has increased in value almost 50%
At the purchase price, the gift represented 30% of the value.
How much should my parents expect to receive?
30% of the current increased value
the gift amount
nothing

Thanks for the input

 

[LdiJ]

What is the name of your state? CA

My parents gave ME, a large sum of money to help with the purchase of our home.
Although their names are not on the deed, the understanding has been that this was an investment,
rather than a present, to never be returned.
It was very well received by my wife at the time, who claimed that she intended to return the funds if we ever sold the house.
This money was recorded during escrow as a "gift".
In case of divorce, does my wife have rights to this money.
The home is under both names, and has increased in value almost 50%
At the purchase price, the gift represented 30% of the value.
How much should my parents expect to receive?
30% of the current increased value
the gift amount
nothing

Thanks for the input

At this point, you are at the mercy of the honorableness of your wife. Legally the money was a gift to both of you, therefore its very possible that your parents could receive nothing. Had your parents been 30% owners right from the start, then they could have expected to receive 30% of the appreciated value. However that isn't the case, and I suspect you will be lucky if your wife agrees to give them back the original amount of money they gave you.

 

[tranquility]

No one knows as there are many issues involved. Generally, a gift can be the seperate property of one spouse. However, that money is presumptively transmuted into a community asset when it was placed in property which was jointly titled. I'm not sure how you can rebut that transmutation without written proof. While I bet there was not a gift tax return filed by your parents, it was listed in the escrow and you probably signed a letter to the loan company saying it was a gift. Those are strong indications it was a gift and could be loan fraud if, in reality, you did not have full rights to the money.

If it were not a gift, the problem becomes harder. Here you have constructive trust theories or perhaps an oral agreement theory for a loan and statute of fraud issues.

I think you are going to have big problems in getting what you want. Some of the problems include the fact the reality of how things have been done are different from what you say your intentions are. If what you say happened, happened, you made false representations on legal documents with the intent to have others rely on those false representations. Technically, that's a crime. Sure, lots of people do it in exactly the same way you did. You will need an attorney to get through this with any chance. You don't want your argument to be, "Your Honor, the money should not be split with my wife because the reality of the situation was we committed fraud."

 

[4AI]

Please explain why the gift can lead to suspicions of fraud?

Those are strong indications it was a gift and could be loan fraud if, in reality, you did not have full rights to the money.

The gift was to me, and it was documented during the loan, that it came from my parents.

 

[Ohiogal]

Please explain why the gift can lead to suspicions of fraud?

The gift was to me, and it was documented during the loan, that it came from my parents.

Because if it was a gift then your parents are NOT due ANYTHING from the sale of the house. Trying to pursue funds for your parents because it was an INVESTMENT means you are now trying to say it was a loan. Which means you lied in securing the home loan by stating it was a gift. Which is committing fraud. The gift may have also been to you HOWEVER it was used to purchase marital property and thus commingled so it lost its status of separate property because your wife is on the deed as well. Half of all equity belongs to your wife. Half belongs to you. Your parents are due NOTHING.

 

[tranquility]

Just as clarification, I don't think there is a "comingling" in that we *can* trace the funds. Comingling is usually where the money is placed in a checking account where funds are going in and out all the time and it is difficult or impossible to trace which funds are for what. Here we can trace the funds, but the titling is presumptive proof that the funds were intended to be made community.

 

[LdiJ]

Just as clarification, I don't think there is a "comingling" in that we *can* trace the funds. Comingling is usually where the money is placed in a checking account where funds are going in and out all the time and it is difficult or impossible to trace which funds are for what. Here we can trace the funds, but the titling is presumptive proof that the funds were intended to be made community.

You are looking at comingling from an accounting standpoint rather than from a divorce law standpoint. I agree with your point from an accounting standpoint.

Believe me, in this instance the funds were "comingled".

 

[tranquility]

While they may have been comingiled, they did not change their character because of the comingling. The character persumptively changed because of the written instrument.

 

[BelizeBreeze]

You are both aruging for the same conclusion from different pedistals.