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
It doesn't matter whether your name is on the title. If you are living in a community property state, and the loan was paid from community funds, during the marriage, the Moore-Marseden Rule allows you to claim an interest in the property, even though the property was bought before marriage using the title holder's own funds.
It doesn't matter whether your name is on the title. If you are living in a community property state, and the loan was paid from community funds, during the marriage, the Moore-Marseden Rule allows you to claim an interest in the property, even though the property was bought before marriage using the title holder's own funds.
My wife and I got married in 1988 I sold my house and purchsed a house in 1988 with the profts $45,000.00 from my old house New house price $69000.00 joint tenents. In 1998 I filed for the big D. A condition of me taking her back was that she sign off of my propertys. She did on both my bussines and my house. My mother paied off the mortage on the house I had purchesed in 1988 and refinanced. the value of home at that time was $125,000.00 balance of the loan was $90000.00 and I quick claimed the property to her. It went to her trust. She passed and the propertys in her trust were transferd to my trust. Now years later 2007 my wife filed for the big D and they are claiming this ruling in regards to the propertys that I own from my mothers trust. I will also add my wife signed off on all of my propertys as sole and seprate property of a married man, not just once but twice. I live in Calif. Her attorney is wall papering me what can I do and, will this apply.
Thanks JIM
Thanks JIM
Hi Jim,
If your wife had signed off the property in your name making it a separate property, then she would not be able to claim community property interest in that. I would suggest you to contact an attorney and take his/her suggestions regarding the issue.
If your wife had signed off the property in your name making it a separate property, then she would not be able to claim community property interest in that. I would suggest you to contact an attorney and take his/her suggestions regarding the issue.
hello, i have a question regarding division of property upon dissolution of a short term marriage in california where there was a pre-existing joint mortgage, basically. quickly the facts, in 2002 i met a woman who had a house from her first marriage. she had just refinanced and had no equity, approx value was $160k. i had a home from my first marriage as well, approx. value $150k with little equity. we lived seperately but had mixed finances for 2 years. in 2004 we moved into her house, sold my house which netted $60k that went into our now joint economy, and refinanced hers, taking out money for debt payoff and improvements to her place. i was put on the deed at that time in 2004, 2 years into the relationship, house approx value $440k. we made improvemnts over the next year, built a shop, remodeled, bought equipment to support her horse hobbies and spent a little on vacations etc. a year later i took out, with her permission, a home equity loan in my name only for $50k to finish the improvements. we were married in dec 2006, married for 1 yr 5 mo. then separated in may 2008. we are now proceeding to the division of assets and i want to know what she and i are intitled to. i am only concerned about the house, the other non-real property isn't really an issue. in the current economy the house has about $25k in equity and we owe approx. $330k total debt on the house. i want to know if the $60k i put in from my house and the $50k from the 2nd will be factored in to the division because it was her house before we were together. or, am i intitled to 1/2 of the house, debt or asset, upon dissolution? also, i have paid 1/2 of the costs of the marital home while not living there since the separation date, while renting my own place, and still am. can i recover any of that approx. $18k thru any means? thank you, don
Hi Don,
Though she purchased the property prior to the marriage, later on the property was refinanced and your name was included in it. Thus, you have ownership rights to that property. Moreover, you have also invested $60k from the sale of your property for the jointly owned property. So, in my opinion, you are entitled to receive that amount. I guess, the loan was being paid from the community funds. So you are entitled to receive a portion of equity.
To know more about how the Moore Marsden rule works, check out the following link:
http://www.mortgagefit.com/know-how/mooremarsdenrule.html
Thanks.
Though she purchased the property prior to the marriage, later on the property was refinanced and your name was included in it. Thus, you have ownership rights to that property. Moreover, you have also invested $60k from the sale of your property for the jointly owned property. So, in my opinion, you are entitled to receive that amount. I guess, the loan was being paid from the community funds. So you are entitled to receive a portion of equity.
To know more about how the Moore Marsden rule works, check out the following link:
http://www.mortgagefit.com/know-how/mooremarsdenrule.html
Thanks.
Thanks for your time. I am trying to work out a deal with her Father to reduce the time and money spent with the lawyers. However, we are on opposite ends of the scale here on how to decide who gets what. We both have hired lawyers, for legal advice only not representation, but are about to get them involved. His position is based on the reimbursement 2540 law, I think, saying I owe her half of the 2004 refinanced amount minus the current debt, or $440K divided by 2 minus half of the $330K left owed equalling $55K give or take, due her, with no consideration for the money I put in at that time from the sale of my house. He is also ignoring the last 10 plus months of my paying half her bills while not being in the home, which upon my lawyers advice is why I came to this page trying to get more info on Moore Marsden. My lawyer said I could ask for her to pay me back the money, (because she wants the house), I payed from the time of separation till now and counting. You have basically answered my question already, I just wanted to finish my train of thought. Thanks Again, Don
My husband purchase a condo 1 year before we were married. He paid $260,775. He refianced several times without my knowledge. Will the calculation be done on the most recent refiance? Here is my formula.
CP unknown Principal paid Current refiance divided purchase price
00.00 518,000 = 518,000 / 260,775 = 1.99%
Current Value and Appreciation 132,000.00
1.99% x 132,000.00 = 262,680.00 / 2 = 131,340.00 CP
Does anyone know if I'm even close?
CP unknown Principal paid Current refiance divided purchase price
00.00 518,000 = 518,000 / 260,775 = 1.99%
Current Value and Appreciation 132,000.00
1.99% x 132,000.00 = 262,680.00 / 2 = 131,340.00 CP
Does anyone know if I'm even close?
Hi dllsoangeles,
I think the calculation would be done on the first mortgage he took on the condo. You need to know how much money was paid towards the principal since marriage to ascertain the exact community property percentage. You cannot divide the refinance amount by the purchase price. The total amount of mortgage principal that has been paid since marriage is to be divided by 260,775 i.e. the purchase price. You also need to find how much appreciation the property has got during the marriage i.e. current market value minus the the fair market value of the property at the time of marriage. You need to seek assistance from an expert in this field to get an exact or even close to exact value of the community interest.
I think the calculation would be done on the first mortgage he took on the condo. You need to know how much money was paid towards the principal since marriage to ascertain the exact community property percentage. You cannot divide the refinance amount by the purchase price. The total amount of mortgage principal that has been paid since marriage is to be divided by 260,775 i.e. the purchase price. You also need to find how much appreciation the property has got during the marriage i.e. current market value minus the the fair market value of the property at the time of marriage. You need to seek assistance from an expert in this field to get an exact or even close to exact value of the community interest.
Hi. Would love some information. Married in Louisiana and jointly purchased a home one month later. Husband put down more money than the wife but title in both names and no pre-nup agreement. Part of husband's down payment came in the form of a check directly from a mortgage co. (from the sale of another house he owned before marriage). Married and paid jointly on principle, interest, taxes, etc. for six years. Upon divorce, is house value split 50 - 50 or does husband get to claim "separate property" on the part of the down payment that came from the sale of his prior home? Thanks!
Hi Soontobedivorced,
I don't think he can claim it as a separate property, because though he paid the majority of the down payment, the payments toward the mortgage (principal,interest etc) were made from the community fund. Thus, both the husband and the wife are entitled to a certain portions of the property. The community property interest will be decided as per the Moore Marsden Rule.
I don't think he can claim it as a separate property, because though he paid the majority of the down payment, the payments toward the mortgage (principal,interest etc) were made from the community fund. Thus, both the husband and the wife are entitled to a certain portions of the property. The community property interest will be decided as per the Moore Marsden Rule.
I owned 2 houses before marriage one that we live in and the other is a rental property, during a divorce is my wife entitled to any of the properties? also during marriage I purchased another rental property the down payment came from a sale of my business and I put her name on the deed along with mine is she entitled to that property? my wife has never worked a day in her life and never contributed in any of the transactions.
I bought a business during marriage the funds came from a line of credit from homes I purchased before marriage, during marriage I sold the business and made a profit, is my wife entitled to any of the profits?
My sister-in-law and her husband convinced my husband to sign over a piece of commercial riverfront property (he purchased just prior to our marriage) with the intent to get a better interest rate on a construction loan for the thirty-one condominiums we had been approved for. We were married 4 yrs. by this time yet they had him sign it over as a "single man" of coarse with no knowledge to me. Well as you might guess they took the property never paying any compensation to him, or myself. I've since filed a lis pendens on the property. What should be my coarse of action from here?
I purchased a house while married, on a 1031 Exchange from a property I owned before marriage. My spouse at the time, a Real Estate Attorney, signed an Interspousal Transfer Grant Deed on both properties. We are divorcing and he is asserting a $62,000 interest in my home. I worked our entire marriage but when I first opened a separate account to handle my home costs, my spouse had a fit and ordered me to put all of my money in our joint account. From that account, we paid mortgages. This was an interest only loan, and during our 12 years togehter, we only paid down $8,000. What is the calculation of his interest, if any especially since the Interspousal Transfer recits he gave up all rights to title, possessionincluding ut not limited to, community property interst. Is this except from Moore/Marden and where did the $62,000come from
Hi,
The house you live in and the rental property, both were purchased before you got married. This means that your spouse had no contribution towards the purchase of the houses. Did you make the mortgage payments from your joint accounts? If you did, your spouse will have a certain share of the property as she partially contributed towards its payments. The other rental property that you purchased during marriage has your spouse's name on the title, right? If her name is on the title to the property, she co-owns it and therefore, is entitled to get a certain share of it.
I don't think she's not entitled to get a share of the profit you made by selling the business. You made the purchase using funds from a line of credit from homes you purchased before your marriage. Now, if you did not put her name on the business, she cannot claim an interest in it.
The house you live in and the rental property, both were purchased before you got married. This means that your spouse had no contribution towards the purchase of the houses. Did you make the mortgage payments from your joint accounts? If you did, your spouse will have a certain share of the property as she partially contributed towards its payments. The other rental property that you purchased during marriage has your spouse's name on the title, right? If her name is on the title to the property, she co-owns it and therefore, is entitled to get a certain share of it.
I don't think she's not entitled to get a share of the profit you made by selling the business. You made the purchase using funds from a line of credit from homes you purchased before your marriage. Now, if you did not put her name on the business, she cannot claim an interest in it.