By Pamela Edwards-Swift, CFLS
Jim and Buffy were happily married on their 5th wedding anniversary. Wanting to show his undying love for Buffy, Jim purchased an expensive diamond and had it set in a gold ring. With pride he presented it to Buffy as an anniversary present, along with a card expressing his love.
As the years went by, the marriage soured and Jim and Buffy decided to divorce. At the trial Jim took the position, and testified, that he considered the ring to be a community property asset. Buffy took the position that the ring was her separate property, after all the ring had been a gift for their wedding anniversary.
So, who won? Well, at the trial level, the Judge made the decision that the ring had indeed been a gift and was therefore Buffy’s separate property. Jim appealed the Judge’s decision, and at the appellate court level, the Justices reversed the trial court’s ruling and held that the ring was a community property asset. How could this be?
In dividing assets during a dissolution proceeding, the husband and wife need to identify the assets and state whether they are community property or separate property. As a general rule, community property is defined as assets acquired during the marriage, and before separation. Among the exceptions to this general rule, is that gifts to one spouse, clothing, wearing apparel, jewelry, or other tangible items of a personal nature used solely by the spouse to whom the gift is made is usually considered the separate property of that spouse.
However, a substantial asset is not considered a gift necessarily. There is a Family Code Section (California Family Code 852 (a)), which states, “A transmutation of real or personal property is not valid unless made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected.”
What did all of this mean to Jim and Buffy? Well the trial Judge had acknowledged, and Buffy agreed, that the diamond ring was a substantial asset (they actually use the word “substantial”). And, because it was a substantial asset, and it had not been put in writing that the ring was Buffy’s separate property, the appellate court followed the law as set forth in the Family Code and held that the ring was actually a community asset.
Practically speaking, it takes all the romance out of gift giving when you start asking your spouse to “sign on the dotted line” that they intend the gift to be your separate property. However, this case (Marriage of Steinberger (2001) 111 Cal.Rptr.2d 521) would appear to stand for the proposition that as unromantic as it may be, it’s what needs to be done to protect a separate property asset.
Pamela Edwards-Swift, Certified Family Law Specialist, 2010, 2011, 2012, 2013 & 2014; Southern California Super Lawyer