Owning Property as Joint Tenants vs Community Property in a Divorce Part 2

As a follow-up to my prior blog on Real Property and Divorce, what if you want to buy a piece of property during your marriage but you want it to be your separate property. What should you do?

Here is an example: You received a significant inheritance and you want to take the inheritance and buy rental property. You and your spouse agree that it will be your sole and separate property since you are using your inheritance, so that spouse signs a quit-claim deed relinquishing any interest in the home. So, that is clearly your separate property, right? Wrong.

In this scenario, holding title in your name alone and having the ability to trace out the separate property down payment is significant. You will likely get that money back (unlike the scenario in titling the property as joint tenancy or community property). In essence, the quit-claim deed confirms your separate property interest that existed at the time of purchase but not after. 

Specifically, if there are mortgage payments made towards this property from your income after you buy the home, there is still a community property interest in this home, under the Malmquist v. Malmquist case. The quit-claim deed alone does not get rid of all potential community property claims. 

To fully confirm an asset is 100% your separate property, you need a separate agreement in writing, such as a postnuptial agreement. A grant-bargain and sale deed is also a better option to a quit-claim deed as they have more legal significance than a quit-claim deed. However, that still may not be enough under the Malmquist case, and the only way to ensure you retain the home as 100% your separate property is a separate agreement in writing. 

Even if you purchase the entire house with 100% your separate property and have the quit-claim deed signed by your spouse, you still should do a separate agreement in writing to confirm the separate property nature of the home. Do everything you can to confirm the intent of the parties at the time of purchase.

Again, at the end of the day, what matters ultimately is the source of funds used to pay the down payment and the mortgage, how the property is titled, and ultimately what evidence can be shown as to the intent of the parties at the time of the purchase. 

Also, please remember that, title companies, real estate agents, and lenders cannot give you legal advice on how to title your property. If you are buying property, contact an attorney and ask questions. The Law Offices of Andriea A. Aden, Esq. is here to help. Call us today at 775-622-9245.