Using Separate Property for Community Property Improvements

In Louisiana, property owned by a spouse in a marriage is classified as either "separate" or "community." This difference is important, because community property is split evenly by the spouses if they get divorced, and separate property remains the sole property of the spouse to whom it belongs.

Scott and Zoe are married. They have been married for sixteen and one half years. They are "loopers." Loopers are a group of boating enthusiasts who, in their spare time, sail in a "loop" around the eastern part of North America. While the routes taken vary slightly, the rough course is as follows: up the eastern seaboard of the United States all the way to the mouth of the St. Lawrence river in Canada; down the St. Lawrence river and into the system of rivers and locks in the state of New York, across this system into the Great Lakes; through the city of Chicago, down the Mississippi, and out into the Gulf of Mexico, around Florida, and back to the eastern seaboard of the United States, to complete the "loop."

Most loopers use sailboats, and Scott and Zoe purchased one together about five years into their marriage. The purchase of the boat was done with funds that they had both earned over the course of the marriage up until that point. They named the boat Chuck.

After completing four or five successful loops in the past few years, the Chuck began to show significant signs of wear and tear. They took it to specialist who recommended to them that it would be very dangerous to attempt another loop without first doing some maintenance to the boat. This was not great news to Scott and Zoe, because they were not very well off at the time, financially speaking.

However, a few weeks later, Scott's mother died. She had a very large estate, and in her will she left to Scott one quarter of a million dollars. Although he was very bereaved at the loss of his mother, Scott almost immediately turned around and spent twenty thousand of those dollars on improvements to the Chuck. Scott and Zoe were happy to have the boat up and running again, and later that year they began doing "the loop" once more.

Fast forward five years. Scott and Zoe decide to get divorced. Looping just isn't cutting it for them anymore, and they both would rather be seeing other people. Furthermore, they cannot seem to agree on how to divide up their finances and other property.

For the purposes of this example, we are going to look at the $20,000.00 dollars Scott spent to improve the boat. This is most likely Scott's separate property, because inheritances to one of the spouses are generally their separate property under Louisiana law. Here, Scott used that separate property to improve what is arguably community property: the Chuck. If a Louisiana court agrees, Zoe will owe Scott half of the increase in the boat's value as a result of Scott's separate money he used to improve the boat. She will not however owe him more than her total community property holdings after the divorce i.e. if she is left with only $15,000.00 dollars, she will not have to pay another five thousand to him out of her pocket.

This article is written to be general information only; it should not be taken as legal advice. Will Beaumont. New Orleans.