Giving Money To Parents: Reimbursement Issues

Posted January 8, 2023

Many of our clients often express concern that their spouses are mishandling or misappropriating money. Claims range from “my spouse is stashing money in accounts I don’t have access to,” “my spouse is mismanaging our retirement account investments,” “my spouse has a gambling addiction,” “my spouse is racking up debt on things we don’t agree on,” “my spouse spent all of our savings on their dream car without telling me,” and many other money spending concerns.

In several cases we’ve handled over the prior several years, we’ve heard clients say that their spouses are giving their money away to their parents, or hiding their money in their parents’ bank accounts. We’ve also heard our clients explain to us why they themselves are sending money to their own parents. Sometimes both spouses are giving money to their parents. For the purposes of this article, we’ll assume that the source of the funds is earnings from work during marriage and that no pre-marital agreement exists (i.e., the money is “community property”).

The most pertinent questions can be summarized as follows:

What happens when you find out that your spouse has been giving community property funds to their parent?
What happens when your spouse finds out that you have been giving community property funds to your parent?
Do either of you owe or need to pay any of the money back?

The answers depend on why the money is being given to your parent(s), and whether that explanation can be proven.

Spouses have fiduciary duties to each other and must not detrimentally impact (impair, damage, harm, diminish, etc.) the other’s interest in community property, including money. In fact, spouses have a duty to fully disclose all material facts and information regarding the existence, characterization, and valuation of all community assets and must provide equal access to all information, records, and books that pertain to the value and character of those assets and debts if the other spouse requests the information. In summary, giving away money without your spouse’s knowledge and consent can lead to you being penalized by the court.

One notable exception is found in Family Code Section 4400, which states that, generally, “an adult child shall, to the extent of the adult child’s ability, support a parent who is in need and unable to self-maintain by work.” Other statutes and case law confirm that this section creates a community obligation—one for which a reimbursement is not required. The task for the giving parent then becomes proving that the support obligation to their parents existed, i.e., the parent was in need and unable to self-maintain by work. If unable to do so, then the actions may be considered an unauthorized gift.

Further Reading » Separate Property Or Community Property?

If both spouses can prove their parents were in need, as defined by the Family Code and case law, then no reimbursements will be owed to the community. If neither spouse can prove their parents were in need, then both will owe reimbursements. Last, if only one can prove their parents were in need, then the other will owe a reimbursement. The cases are highly fact-specific and require corroborating evidence that the parent receiving support is, in fact, in need of support pursuant to the Family Code.

If possible, although in most cases it is too late, you should consult with a family law attorney prior to giving community funds to your parents if your spouse does not agree with you doing so. If you do have a community obligation, it would be wise for your spouse to consult with an attorney regarding the obligation so they understand why you need to give funds to your parents. Otherwise, you are likely to create a rift regarding finances in your household.

The vast majority of the time, these questions and claims do not come up until divorce is already in progress. Understanding this unique section of the Family Code will allow you to gather the appropriate information to support your positions, or if necessary, cut your losses to avoid further financial penalties and legal fees if it is a losing issue.

It is important to know your rights, responsibilities, and options regarding parent support and gift giving and for negotiating an appropriate financial settlement in your matter. Our family law team at Naimish & Lewis can advise you on this and other family law matters. To schedule an initial consultation with an attorney at our firm, please contact us.

Child Support, Divorce

Robert J. Allison, Esq.

Mr. Allison is a resolution-oriented associate attorney in our Family Law Practice. Even-keeled and fact focused, he is able to assist our clients understand their rights and obligations through the stress and smoke and mirrors presented in their divorce, custody, and domestic violence matters. During the initial consultation, and again once facts and evidence have been collected, Mr. Allison provides various strategies to help clients present their cases, considering cost, time, and client needs. He prides himself in not making false promises to his clients and is unafraid to speak the raw and sometimes harsh reality of how a Court will decide a matter given a specific set of facts and circumstances, both to his clients and to opposing parties. Many potential clients share that they are unhappy with their previous attorneys because they felt a lack of communication, an uncertainty about the family law process and timeline, and they do not understand the strategy in their case or the invoices they receive. While the legal process is complex, Mr. Allison attempts to reduce the confusion through a reasonable case management process involving client participation, because a family law case is often the most difficult period of time in a client’s life.