Garden Grove, CA asked in Divorce, Estate Planning, Real Estate Law and Family Law for California

Q: Brother is getting divorced after 6 years, but might back out due to worry over inherited home.

I did everything according to my lawyer as trustee of my parent's trust, which contained their home. Upon their death, My brother deposited my half of the money into the trust. I then, as trustee, signed the house over to him. That meant, according to my lawyer, he inherited 100% of the house, since I signed quit claims as gift, no money received personally. It was worth 610,000.00 at the time. Now it's worth about 830, 000.00. But he has the loan for the money he put in trust, and he was freshly married and his wife would not sign off any claim, so in order to get the loan he had to quit claim the house aka put her on the title. Now I have been told that he did not transmute the property due to that because his intention was he needed the refinance in order to keep the home so he was sort of coerced into the deal. But, as per community state laws, she still is entitled to half the equity. That's 220,000...except for there is a 300,000 loan on it...does she get anything then?

1 Lawyer Answer
James L. Arrasmith
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  • Estate Planning Lawyer
  • Sacramento, CA
  • Licensed in California

A: In California, property acquired through inheritance is generally considered separate property, not subject to division in a divorce. However, the situation becomes more complicated when a spouse is added to the title of the inherited property, as it may be seen as converting the property from separate to community property, depending on the circumstances and intentions behind the action.

Your brother's addition of his wife to the title without a clear agreement stating the property remains his separate property could potentially be interpreted as a gift to the marital community, thus subjecting it to division upon divorce. The fact that this action was taken to secure a refinancing loan complicates matters, as it could be argued that the property was commingled with community assets, making at least a portion of it subject to division.

The equity in the home and the outstanding loan balance are both crucial factors in determining what, if anything, his wife is entitled to. If the property is deemed to have been commingled and thus partially community property, the increase in value during the marriage could be subject to division. However, the existing loan reduces the net equity available for division. If the house is considered community property, or partly so, she may have a claim to a share of the equity, factoring in the loan balance. However, the specifics of how much she would be entitled to depend on a detailed legal analysis considering all contributions and the property's status.

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