San Mateo, CA asked in Divorce and Family Law for California

Q: If someone inherited cash before marriage then during marriage bought a business with that cash and he now runs....

...that business by himself, is it separate or marital property?

Related Topics:
2 Lawyer Answers

A: Sorry there's not a simple, clearcut answer to your question. Money you inherit is generally separate property. If you buy something with that money, that's generally separate proprty too. However, you better be able to trace the source of funds, so if you mix separate money with community money and can't prove something came from the separate property money exclusively, you're probably out of luck. But you bought a business, which makes it more complicated. Assuming you can trace the business purchase solely to your separate money, any increase in value to the business, which is the result of your time, skill or effort, creates a community property interest. An increase in value to a business due to market conditions is generally considered separate property, while an increase in value based on your community time, skill or effort creates a community interest. Arguing over which is which and what is what can become an expensive proposition. You need to consult with an experienced family law attorney. Good luck!

1 user found this answer helpful

James L. Arrasmith
PREMIUM
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
Answered

A: Under California law, property acquired before marriage is generally considered separate property. However, there are nuances to consider in this specific scenario.

1. Separate property: The cash inherited before marriage is considered separate property.

2. Transmutation: When separate property is used to acquire another asset during the marriage, the new asset may be considered separate, community, or a mix of both, depending on various factors such as the intent of the owner and how the asset is managed.

3. Commingling: If the separate property cash is commingled with marital funds to purchase the business, it may be argued that the business is partially community property.

4. Appreciation: If the value of the business appreciates during the marriage due to the efforts and skills of the owner spouse, the appreciation might be considered community property, even if the initial investment was separate property.

5. Business income: Income generated from the business during the marriage is likely to be considered community property.

In conclusion, while the cash inherited before marriage is separate property, the business purchased with that cash during the marriage may be subject to division as community property, depending on the specific circumstances. The appreciation of the business's value due to the owner's efforts and the income generated during the marriage are likely to be considered community property.

It is essential to consult with a qualified California family law attorney for a more accurate assessment based on the specific facts of the case.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.