Do My Parents get Paid Back for Loans They Made to My Spouse and I When We Divorce or Legally Separate in San Diego in 2014?

WHY ARE PARENT LOANS DIFFERENT FROM OTHER LOANS FOR PURPOSES OF LEGAL SEPARATIONS OR DIVORCE IN SAN DIEGO SUPERIOR COURT?

In many legal separation and divorce cases in San Diego, parents make loans or gifts to their children who are the spouses in the family law case. When the parties are married, this is often not an issues however, when a divorce or legal separation is filed in San Diego Superior Court, often the parents would like to have the loans reimbursed to them and their child does as well however the other spouse [not their child] does not. Given that there is an innate and natural bias of a parent towards their child, the Judges in San Diego often treat these reimbursement requests with a “jaundiced eye” and are hesitant to make orders, first, due to the parent’s not being a party to the case and, second, since the spouses themselves are biased. It would be different if the spouse who was not the child of the parents’ who made the loan agrees to the reimbursement and the child of the parents does not.

WHAT IS THE LAW FOR PARENT LOANS WHEN A JUDGE MAKES AN ORDER FOR DEBT DIVISION AND ALLOCATION IN A FAMILY LAW CASE?

This is only a summary of the law for article purposes as with all articles on this legal website. A difficult issues are always loans from parents as stated above. In the past, a strategy was [for the party whose parents gave the money] to characterize it as a loan and then contend that they were demanding payment. The other party would then, of course, take the legal position that the money was a gift and did not need to be repaid. If there was repayment, this repayment would go to the other spouse a “gift”. In many San Diego cases, the funds {whether gift or loan] was given so many years ago that if it were, in truth and could be proved, a loan, the loan itself would not be collectible due to the Code of Civil Procedure. While the Family Law Code governs family law cases, the Code of Civil Procedure is also applicable. As such, if the obligation is founded on a contract such as a written instrument, then the statute of limitations for enforcement is 4 years under Code Civ. Proc. §337. Furthermore, if the obligation is not written and is only oral, then the statute of limitations is two years under Code Civ. Proc. §339. While the statute of limitations does not legally eliminate or extinguish the obligation, there is a bar to enforcement if this defense is raised. As such, only debts which can be enforced will be considered by the Judge at a hearing and no credit should be given for it in the division of property. This was the law before December 31, 1983 as to the strategy of the loan. After January 1, 1984, however, the new strategy [still 30 years later] is to try to meet the burden of proof that the money was a gift to one spouse. As reimbursement is now permitted for separate property contributions to the acquisition of a community property asset which can be traced, under Family Law Code §2640, this may provide the relief of reimbursement where a loan will not. A careful legal analysis must be made of each case based on the specific facts.

HOW IS THIS ISSUE RESOLVED IN SAN DIEGO SUPERIOR COURT

As the issue is whether or not the money was received as a gift or loan, how does a Judge decide? As neither the parents [in many cases], nor the parties [in many cases] can be counted on to testify honestly, the Judge has to assess credibility, demeanor, conduct and the evidence before making a ruling. As the testimony of the parties and parents, even if they are available to testify, may not be believed by the Judge due to the innate bias as above, the preferable strategy is to use evidence. The evidence and facts and circumstances surrounding the receipt of the money may be, to the Judge, the best indicator of its character. Below is a checklist which the Judge may use to assist in determining whether the payment was a gift or loan and, in addition, to whom the payment was intended:

*Who was the payee listed on the check? Was there more than one payee? Were both spouses payees?
*Was the check deposited into a joint community account?
*What was the check intended for? What was the check used for?
*If the legal position is that this was a gift and not a loan, was a gift tax return filed? If so, who is shown as donee?
*Was the money received during a holiday where giving gifts is customary such as Christmas? Was it on a birthday or anniversary of the parties?
*Is there any past history of gift giving?
*Were there any other similar payments made to other siblings?
* Most important, if you are contending this is a loan, does a promissory note or other writing exist? If so, has it been enforced? If so, were any payments ever made? If not were any payments ever demanded?
*If it was a loan, would it still be enforceable under California law?

HOW CAN A SAN DIEGO LAW FIRM PROTECT ME?

The law firm of Doppelt & Forney, APLC has been protecting client’s rights for many years in San Diego Superior Court. If you have an issue with a gift or loan from a parent, or any other family law matter in San Diego, please feel free to schedule your complimentary appointment today.

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