Posted on: 27th Oct, 2006 02:13pm
If you buy property prior to marriage with a down payment from your own funds, but make payments with community funds during marriage, then your spouse will have community interest in the property. Community funds imply your spouse's money and yours as spent towards loan payment. The community interest is known as Moore Marsden interest, which is calculated using a formula known as Moore Marsden Rule.
The Moore Marsden Rule also applies to cases involving separate commercial property and where parties refinance a separate residential mortgage during marriage. However, the Rule is applicable only in case of states where the community property division exists.
The Moore Marsden Rule also applies to cases involving separate commercial property and where parties refinance a separate residential mortgage during marriage. However, the Rule is applicable only in case of states where the community property division exists.
How to calculate Community property interest
Applying Moore Marsden Rule, the community property interest is calculated as:
CP = PPCP + (CP% x MApp)
Where,
CP: Community property interest
PPCP: Payments towards Principal from community property
CP%: Community property percentage = PPCP / Purchase Price
MApp: Appreciation during marriage
SP = DP + PPSP + Pre-MApp + (SP% x MApp)
Where, SP: Separate property
DP: Down payment on property
PPSP: Payments towards Principal from separate property
Pre-MApp: Pre-marriage appreciation
SP%: Separate property percentage = 100% - (PPCP / Purchase Price)
Let's take an example:
Kim purchased a $300,000 house in 1992 prior to her marriage. She made a down payment of $50,000 and borrowed $250,000. Kim paid down $20,000 in principal by 1997 when she married Dick. The fair market value of the house at the time of marriage in 1997 was $400,000.
During their marriage Kim and Dick paid 30,000 towards the principal from community property. When Kim and Dick separated in 2005, the fair market value of their home was $600,000.
Now, applying the formula given by Moore Marsden Rule,
Community property percentage (CP%) = $30,000/$300,000 = 10%
Separate property percentage for Kim = 100% - 10% = 90%
Community property interest = PPCP + (CP% x MApp)
= $30,000 + (10% x $200,000)
= $30,000 + $20,000
= $50,000
Since community interest is divided into half, therefore both Kim and Dick will get = ($50,000/2) = $25,000 each.
Kim's separate property interest = DP + PPSP + Pre-MApp + (SP% x MApp)
= $50,000 + $20,000 + $100,000 + (90% x 200,000)
= $170,000 + $180,000
= $350,000
On separation and divorce, Dick gets: $25,000 as community interest
And, Kim's community and separate property interests = $350,000 + $25,000 = $375,000
Principal balance of loan to be paid off by Kim = $250,000 - ($20,000 + $30,000) = $200,000
So, when a couple divorces in a community property state, the court will award half of community interest to each spouse and 100$ separate property to the spouse who bought the property with separate funds.
CP = PPCP + (CP% x MApp)
Where,
CP: Community property interest
PPCP: Payments towards Principal from community property
CP%: Community property percentage = PPCP / Purchase Price
MApp: Appreciation during marriage
SP = DP + PPSP + Pre-MApp + (SP% x MApp)
Where, SP: Separate property
DP: Down payment on property
PPSP: Payments towards Principal from separate property
Pre-MApp: Pre-marriage appreciation
SP%: Separate property percentage = 100% - (PPCP / Purchase Price)
Let's take an example:
Kim purchased a $300,000 house in 1992 prior to her marriage. She made a down payment of $50,000 and borrowed $250,000. Kim paid down $20,000 in principal by 1997 when she married Dick. The fair market value of the house at the time of marriage in 1997 was $400,000.
During their marriage Kim and Dick paid 30,000 towards the principal from community property. When Kim and Dick separated in 2005, the fair market value of their home was $600,000.
Now, applying the formula given by Moore Marsden Rule,
Community property percentage (CP%) = $30,000/$300,000 = 10%
Separate property percentage for Kim = 100% - 10% = 90%
Community property interest = PPCP + (CP% x MApp)
= $30,000 + (10% x $200,000)
= $30,000 + $20,000
= $50,000
Since community interest is divided into half, therefore both Kim and Dick will get = ($50,000/2) = $25,000 each.
Kim's separate property interest = DP + PPSP + Pre-MApp + (SP% x MApp)
= $50,000 + $20,000 + $100,000 + (90% x 200,000)
= $170,000 + $180,000
= $350,000
On separation and divorce, Dick gets: $25,000 as community interest
And, Kim's community and separate property interests = $350,000 + $25,000 = $375,000
Principal balance of loan to be paid off by Kim = $250,000 - ($20,000 + $30,000) = $200,000
So, when a couple divorces in a community property state, the court will award half of community interest to each spouse and 100$ separate property to the spouse who bought the property with separate funds.
kindly anyone provide some information on how the Moore/Marsden interest is calculated.
Hi MMR,
A Moore Marsden situation comes up when one of the spouses has a property belonging to him/her before marriage and has been paying regularly mortgage amounts.
After the marriage the other spouse also makes contributions towards payment of the mortgage thus making the other spouse eligible for a share of the interest in the property according to the Moore Marsden rule at the time of divorce.
The calculation under this rule specifies exactly how much the other spouse will be getting.
Thanks
James
A Moore Marsden situation comes up when one of the spouses has a property belonging to him/her before marriage and has been paying regularly mortgage amounts.
After the marriage the other spouse also makes contributions towards payment of the mortgage thus making the other spouse eligible for a share of the interest in the property according to the Moore Marsden rule at the time of divorce.
The calculation under this rule specifies exactly how much the other spouse will be getting.
Thanks
James
Hi,
This following formula is used to determine the community and separate property interest that each of the spouses is entitled to get if there are contribution made by a spouse towards liability payments of a separate property.
CP = PPCP + (CP% x MApp)
CP: community property
PPCP: principal payments from community property
CP%: community property percentage = PPCP / Purchase Price
MApp: appreciation during marriage
SP = DP + PPSP + Pre-MApp + (SP% x MApp)
SP: separate property
DP: down payment
PPSP: principal payments from separate property
Pre-MApp: premarriage appreciation
SP%: separate property percentage = 100% - PPCP / Purchase Price
Please let me know if you have any other doubt.
Thanks
Colin
This following formula is used to determine the community and separate property interest that each of the spouses is entitled to get if there are contribution made by a spouse towards liability payments of a separate property.
CP = PPCP + (CP% x MApp)
CP: community property
PPCP: principal payments from community property
CP%: community property percentage = PPCP / Purchase Price
MApp: appreciation during marriage
SP = DP + PPSP + Pre-MApp + (SP% x MApp)
SP: separate property
DP: down payment
PPSP: principal payments from separate property
Pre-MApp: premarriage appreciation
SP%: separate property percentage = 100% - PPCP / Purchase Price
Please let me know if you have any other doubt.
Thanks
Colin
Hi Guest,
Under the laws in California, when a couple gets a divorce, the court divides the community property into half and distributes each half to each partner. This implies that if a person owns a property prior to getting married, he can retain his separate property even after the divorce. But the rule differs in case of certain exceptions; for example, you can combine your assets and can create an asset community property.
Now, you may make a down payment on a piece of real property using separate property funds before marriage. But during your marriage you may make mortgage payments from your community funds. In that case, your spouse will have a community interest in that property. This interest is known as Moore Marsden interest. The interest is calculated on the basis of the principal loan amount paid from the community funds. You will however get back an amount equal to the down payment made from the separate property funds.
Thanks,
Caron.
Under the laws in California, when a couple gets a divorce, the court divides the community property into half and distributes each half to each partner. This implies that if a person owns a property prior to getting married, he can retain his separate property even after the divorce. But the rule differs in case of certain exceptions; for example, you can combine your assets and can create an asset community property.
Now, you may make a down payment on a piece of real property using separate property funds before marriage. But during your marriage you may make mortgage payments from your community funds. In that case, your spouse will have a community interest in that property. This interest is known as Moore Marsden interest. The interest is calculated on the basis of the principal loan amount paid from the community funds. You will however get back an amount equal to the down payment made from the separate property funds.
Thanks,
Caron.
I'm still a but confused on how to calculate this. How do you come up with the CP%
Welcome Denise.
The CP% denotes what percentage of the purchase price of property is the total payment made by both spouses for the community property.
CP% = PPCP / Purchase Price, where PPCP = payments towards the principal loan balance by the owners of community property, that is, property owned by both spouses from the beginning of marriage till the date of separation. It does not matter if only one spouse have earned all property or assets before marriage.
After marriage, both husband and wife own the property equally without any regard to who actually purchased it.
Thanks.
The CP% denotes what percentage of the purchase price of property is the total payment made by both spouses for the community property.
CP% = PPCP / Purchase Price, where PPCP = payments towards the principal loan balance by the owners of community property, that is, property owned by both spouses from the beginning of marriage till the date of separation. It does not matter if only one spouse have earned all property or assets before marriage.
After marriage, both husband and wife own the property equally without any regard to who actually purchased it.
Thanks.
OK, now next question. What happens to the equity of the property after marriage when both spouses are contributing to it? ie: At time of marriage our house was worth $180,000.00. It is now worth ~$460,000.00. What would I be entitled to of the equity?
Hi Denise,
You will be entitled to half of the current equity in your home as per the rules of the community property state. By the way, what's your state of residence? I guess it is community property state too. Otherwise, the rule won't apply.
What I mean by saying that you are entitled to half of the equity is that, if the property is sold off, you will get the price of half the equity in your home.
Thanks,
Sara
You will be entitled to half of the current equity in your home as per the rules of the community property state. By the way, what's your state of residence? I guess it is community property state too. Otherwise, the rule won't apply.
What I mean by saying that you are entitled to half of the equity is that, if the property is sold off, you will get the price of half the equity in your home.
Thanks,
Sara
Thank you Sara. I live in California. My ex to be bought the house in 1994. We have lived together & I have contributed to the home since 2000. We were married in 2001. He refinanced in 2004, but did not put me on the deed. The current plan is to buy him out so he can move out of state. He says I am only entitled to 1% per Moore-Marsden. That just doesn't sound right to me.
Thanks,
Denise
Thanks,
Denise
Hi Denise,
Welcome back.
I think it will be better if you can calculate the community property interest from the Moore Marsden formulae given above. Then divide the total interest by 2. This will give your share of interest in the property.
It is better to verify for yourself as it concerns your part of ownership interest.
Thanks,
Sara
Welcome back.
I think it will be better if you can calculate the community property interest from the Moore Marsden formulae given above. Then divide the total interest by 2. This will give your share of interest in the property.
It is better to verify for yourself as it concerns your part of ownership interest.
Thanks,
Sara
My wife is on script drugs and is out of control i was injured by her ex not putting lugs on tight, just out backsurjury and her abuse 2 my 2yr an i too much..!!!3yrs /ins to pay soon many $ help
Anonymous,
What exactly are you looking for? pls exlplain.
What exactly are you looking for? pls exlplain.
been married 3 yrs i heard that 4 th year cut off for having to pay alimoney new mrs 2wks after wed flips on ways 2more wks is pregnant and six mo later i almost die in auto and bankrupts me when im disabled pays miss accounts w/new mrs cards my credits shot/thank god for surjury im geting well 200k in debt pay her off w/settlement 25/75 50/50 ? what is she entitled to i rent now /her addict behavior has caused death to our marriage i try to just protect my daughter 2yrs she will buy alot of drugs with a share an i heard that if spouce is on drugs they will lose shares /so if im getting 100k what might i have to give her
The situation you are in my suggestion would be to contact an attorney and get legal advice. As she is used to drugs you can get legal advantage while decision is made on alimony payments.
Does cost of improvements have any factor in the Moore-Marsden calculation. We made over $15,000 in improvements/remodeling to my Ex2B's house. Also, he is trying to tell me that the $23,000 more that he put into his 401K can either be paid to me as $7,000 now instead of filing for a Qualified Domestic Relations Order. Can it be reduced that much by having him pay it up front; not having to deal with it later?
Hi Denise,
It include the home improvement cost as a factor in the Moore-Marsden calculation provided the improvement can increase the home value appreciably.
It include the home improvement cost as a factor in the Moore-Marsden calculation provided the improvement can increase the home value appreciably.