Following their divorce, actress Katie Holmes reportedly kept millions of dollars worth of gifts given to her by her husband, Tom Cruise. These gifts include valuable jewelry, handbags, and other luxury items. Although many speculated that she did not receive a relatively substantial portion of Cruise’s estate in the property settlement, she may have been satisfied with keeping the gifts. Throughout the divorce proceedings, one of Holmes’ most pressing concerns was the financial wellbeing of her daughter, Suri. Luckily for Suri, she will be able to inherit millions in gifts given by her father to her mother as long as Holmes does not decide to sell them first.

Often in Del Mar and throughout San Diego County parties are unclear about the role gifts play in divorce. There are two main contested issues regarding gifts in divorce proceedings. First, gifts between spouses and second, gifts of community property from one spouse to a third party.

Gifts between spouses: Under California Family Code section 852, a “transmutation” of personal property is not valid unless made in writing. A transmutation is the conversion of one asset from community property to separate property or from separate property to community property. Under the Code, this can only be done by written agreement. However, one exception to this rule concerns gifts between spouses. A gift of clothing, wearing apparel, jewelry, or other tangible articles of a personal nature from one spouse to the other can be transmuted absent written agreement as long as it is not substantial in nature taking into account the circumstances of the marriage. This means that the court will consider the standard of living of the parties in order to determine whether the gift was “substantial.” Considering the multimillion dollar net worth of Tom Cruise, a $100,000 gift to his wife is not substantial.

Additionally, as we have previously blogged, where a gift is given in contemplation of marriage (such as an engagement ring) and the donee refuses to enter into the union, the donor may recover the gift.

Gifts from spouse to third party: During marriage, both spouses have equal rights to manage community property. However, the California Family Code does not recognize “gifting” as a management power. Thus, one spouse is not permitted to give a gift of community property to a third party without the consent of the other. In fact, a gift by one spouse during marriage of community property may be entirely set aside by the other. This right to set aside unilateral gifts of community property even survives the death of the gifting spouse.

Please contact us if you are considering a divorce from your spouse, a legal separation, or have questions regarding child custody and visitation. Nancy J. Bickford is the only attorney in San Diego County representing clients in divorces, who is a Certified Family Law Specialist (CFLS) and who is actively licensed as a Certified Public Accountant (CPA). Don’t settle for less when determining your rights. Call 858-793-8884 in Del Mar, Carmel Valley, North County or San Diego.