## Facts

- Stanley Robert Kraly and Susan Marie Kraly married in April 2003.
- Stanley sold a premarital Florida home and received over $500,000 in net proceeds, which were his separate property.
- In March 2004, Stanley used $167,500 of those proceeds to buy 60 acres of unimproved land in Bonner County, Idaho (Lightning Creek property).
- The deed conveyed title to “Stan Kraly and Susan Kraly, Husband and Wife.”
- Stanley filed for divorce in Idaho in October 2004; the divorce decree entered in August 2005 reserved property distribution issues, leading to a March 2006 trial on Idaho property.

## Issues

1. Whether the Lightning Creek property, acquired during marriage entirely with traceable separate funds but titled in both spouses’ names, was separate or community property.
2. Whether joint title created a presumption of gift to the community or to the other spouse, and whether that presumption was rebutted by evidence of no donative intent.
3. Whether a court may treat the asset as community property while reimbursing the purchasing spouse for separate funds used to acquire it, when the trier of fact finds no donative intent.

## Decision

- The Idaho Supreme Court affirmed the district court.
- The Lightning Creek property was Stanley’s separate property.
- Susan had no ownership interest and was not entitled to any share of the property’s value or appreciation.
- The court accepted the magistrate’s factual findings (separate source of funds; no donative intent) but rejected the magistrate’s legal characterization of the property as community with reimbursement.

## Legal Principles

- Property acquired with funds traceable to a spouse’s premarital separate property remains separate absent a gift or other valid change in character.
- Taking title in both spouses’ names may create a rebuttable presumption of gift, but the presumption can be overcome by clear and convincing evidence of contrary intent.
- A gift requires donative intent; if the trier of fact finds no donative intent, joint title alone does not establish a gift.
- Property characterization is a question of law based on factual findings; legal title does not control when inconsistent with the proven source of consideration and intent.
- It is legally inconsistent to find that separate funds purchased property with no donative intent, yet classify the property as community and merely reimburse the purchasing spouse.

## Conclusion

Because the purchase price was entirely traceable to Stanley’s separate property and the trier of fact found no intent to gift despite joint titling, the Lightning Creek property remained Stanley’s separate property, and Susan was entitled to no interest in it.


Kraly v. Kraly, 208 P.3d 281 (Idaho 2009)