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Much Ado About Inheritance in California Divorce Case – In re Marriage of Taylor

In In re Marriage of Taylor, California’s Fourth District Court of Appeals takes on an interesting issue in the divorce context: what to do about a divorcing spouse’s inheritance when it was likely increased because of work by the other spouse.

wooden-box-1228830-mHusband and Wife separated in January 2010 after roughly 15 years of marriage. Husband was employed as a sheet metal worker for about half of that time and retired in 2002 to help manage his mother’s real estate properties. He and Wife, who had primarily been a homemaker, bought and sold a number of properties for Husband’s mother. They also repaired and renovated three apartment buildings. Although he hired people to perform some of the work, Husband did much of the drywall, electrical and plumbing tasks. Meanwhile, Wife cleaned, decorated, and painted the apartment units. Neither was paid for their work, but did it under an agreement with Husband’s mother that the property would ultimately be divided in a way that compensated Husband for his efforts. Specifically, Mother pledged to give Husband 75% of the properties she owned in trust as inheritance. Husband eventually inherited about $1.666 million when his mother passed away in 2007.

Although inheritance is typically considered separate property, the trial court said there was a community aspect to it because both spouses’ efforts during the marriage helped increase the value of Husband’s inheritance. Had they not helped out with the properties, the court assumed that Mother would have divided the inheritance equally among Husband and his brother. As a result, the court held that the amount inherited beyond the 50% mark – about $333,000 – was community property to be divided among the spouses.

The Fourth District affirmed the decision on appeal. “Where community efforts increase the value of a separate property business, it becomes necessary to quantify the contributions of the separate capital and community effort to the increase,” the Court explained, citing its 1993 decision in In re Marriage of Dekker. Here, the Court said substantial evidence supported the trial court’s finding that Wife’s efforts helped increase the value of Husband’s inheritance.

The Court further ruled that the fact that Wife stipulated during trial that the inherited property was Husband’s separately didn’t change the outcome. It explained that the property was a form of deferred compensation, an issue that neither party addressed in the lower court proceedings. “[Wife] asserted during the trial that the community was entitled to reimbursement for the amount [Husband]’s inheritance was increased by the community’s efforts,” the Court said. “As we have concluded, the court correctly divided the amount the properties increased in value due to that community effort.”

San Jose divorce lawyer John S. Yohanan, has extensive experience handling a wide range of divorce issues, including those related to community property and inheritance. If you want a family lawyer with more than 30 years of experience on your side, call our office at (408) 297-0700.

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