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.
My sister's ex made no payments on the mortgage during the time they were married, but because the home is community property the judge basically gave him a half interest. She would like to include his half of the mortgage payments (which he didn't pay) as a reimbursement to her. Is this logical under the Moore/Marsden concept?
Hi sinbad,
It does sound logical. As per the Moore Marsden rule, each spouse will get a share of the property if they purchased it while married and if the mortgage payments were made from community funds. The community property belongs to both the spouses and both of them should be liable towards its obligations. In case, your sister made most of the payments from her own fund, she should be entitled to a larger share of the community property. I think she should consult an attorney regarding this as I believe she has a right to claim a larger share of the property.
Thanks,
Jerry
It does sound logical. As per the Moore Marsden rule, each spouse will get a share of the property if they purchased it while married and if the mortgage payments were made from community funds. The community property belongs to both the spouses and both of them should be liable towards its obligations. In case, your sister made most of the payments from her own fund, she should be entitled to a larger share of the community property. I think she should consult an attorney regarding this as I believe she has a right to claim a larger share of the property.
Thanks,
Jerry
While we were separated, we bought a condo California in 1996. Its purchase price was $300,000. We paid down payment of $80,000 which was community fund with original mortgage balance of $220,000. My wife reduced that balance to $180,000 using her separate fund of $40,000. Its market price is now $600,000. How do I calculate community and separate portions of the property. Thank you very much in advance for your answer.
Hi Harry,
In this situation,
The payments towards principal from the community property (PPCP) = $80,000
Community property percentage = PPCP/ Purchase price = 80,000/ $300,000 = 0.26%
Appreciation during marriage = $(600,000-300,000) = $300,000
The community property interest
= PPCA + (CP% of MApp)
= $80,000 + (0.26% of 300,000)
= $80, 780
This is an approximate valuation of the community property interest. Since your wife also paid some amount of money towards the mortgage principal from her separate funds, the actual value of the community property interest can differ from the approximate value. The calculation involves certain intricacies and varies from one situation to another.
Thanks,
Jerry
In this situation,
The payments towards principal from the community property (PPCP) = $80,000
Community property percentage = PPCP/ Purchase price = 80,000/ $300,000 = 0.26%
Appreciation during marriage = $(600,000-300,000) = $300,000
The community property interest
= PPCA + (CP% of MApp)
= $80,000 + (0.26% of 300,000)
= $80, 780
This is an approximate valuation of the community property interest. Since your wife also paid some amount of money towards the mortgage principal from her separate funds, the actual value of the community property interest can differ from the approximate value. The calculation involves certain intricacies and varies from one situation to another.
Thanks,
Jerry
In order to figue out the FMV at the time of marriage and again at divorce time is "what is owed" taken into account?
Also, what date is last FMV? Date of trial or date of separation?
Also, what date is last FMV? Date of trial or date of separation?
If a single man buys a house for $29K and a year later takes out a $50K loan to pay the first mortgage and remodel/repair it. What is considered the purchase price if 10 years later he marries and the married couple make payments, then divorce 10 years after that? Good one, huh?
Why is it that in the description of the Marsden divorce case, the loan balance is subtracted from the FMV whether it is at the point of marriage or at the point of divorce and now the Moore/Marsden formula omits any loan balance from the formula?
DAUGHTER IN LAW AND FATHER IN LAW PURCHASED A HOUSE FOR 90K.
DAUGHTER IN LAW GETS DIVORCED WHAT IS THE PERCENT OF OWNERSHIP FOR THE FATHER IN LAW.
DAUGHTER IN LAW GETS DIVORCED WHAT IS THE PERCENT OF OWNERSHIP FOR THE FATHER IN LAW.
To SEEYOU,
The property will not be subject to the community property laws because it is not owed by spouses. It was purchased by the daughter in law and the father in law. The father in share in the property will be determined by his share of ownership in the property. If he owns the property as a joint tenant and has equal ownership rights to the property, the proceeds from the sale of the home will be distributed equally among them.
To Wilderd,
The mortgage on the property is a community liability and it has to be paid off when the property is sold. The financial obligation has to be paid first before distributing the property among the spouses. This is why the loan balance is subtracted from the fair market value of the property. As far as I know, the Moore Marsden formula does not omit the mortgage. The calculations do include the down payment and the payments made towards the principal balance of the loan.
The property will not be subject to the community property laws because it is not owed by spouses. It was purchased by the daughter in law and the father in law. The father in share in the property will be determined by his share of ownership in the property. If he owns the property as a joint tenant and has equal ownership rights to the property, the proceeds from the sale of the home will be distributed equally among them.
To Wilderd,
The mortgage on the property is a community liability and it has to be paid off when the property is sold. The financial obligation has to be paid first before distributing the property among the spouses. This is why the loan balance is subtracted from the fair market value of the property. As far as I know, the Moore Marsden formula does not omit the mortgage. The calculations do include the down payment and the payments made towards the principal balance of the loan.
Hi, my husband bought our house in 12/03. Then, we got married in 7/05. We refinanced in 07. The house was purchased for 446. The principal amount on the mortgage that is owed is 396. But he took out an equity line of credit, which I did not know about for 20K. He still owes 16K. The house could be worth between 457 and 600 depending on who you go through. We put in about 90K remodeling. Principal paid, I guess would be $34K.
1. His lawyer is saying that because he owned the house 19 months prior to being married out of the 74 months that we were married, he gets 25% and I get half of 75%. Is this right according to the Moore Marsden claim.
2. What is the 2540 reimbursement law?
3. Would it be better for me to buy him out or to take the money? I have the option of either one. But he's saying that in order for me to buy him out I need to pay him $85K. is this worth it?
He is saying that the house is worth $550 and $412 is still owed, so equity is $138
Also, he put a down payment of 12K. And my name is not on the title. When we refinanced, he lied. I just found out that in 07 when he refinanced, he filed as "an unmarried person"
Please give me advice on what to counter for the settlement letter regarding the house.
1. His lawyer is saying that because he owned the house 19 months prior to being married out of the 74 months that we were married, he gets 25% and I get half of 75%. Is this right according to the Moore Marsden claim.
2. What is the 2540 reimbursement law?
3. Would it be better for me to buy him out or to take the money? I have the option of either one. But he's saying that in order for me to buy him out I need to pay him $85K. is this worth it?
He is saying that the house is worth $550 and $412 is still owed, so equity is $138
Also, he put a down payment of 12K. And my name is not on the title. When we refinanced, he lied. I just found out that in 07 when he refinanced, he filed as "an unmarried person"
Please give me advice on what to counter for the settlement letter regarding the house.
Hi,
My soon to be ex wife and I purchased land together while married in CA. She contributed 90% of the down payment from separate property (but to complicate the matter, the proceeds of the supposed separate property were distributed to both our names and to my SSN as part of a 1031 exchange so that may transmute the SP to CP right there, anyone know?). We then paid the land-only loan off completely with a new loan for a home we built on the property. The intent was certainly for the home to be community property, but now in divorce the is trying to get 100% of her DP out of the home. I claim that the home was purchased solely from a community property loan but she is trying to claim that the land purchase is separate. The title is now for the home and the land not the land and home separately. I believe it is 100% community property, does anyone know if that is the case in CA? Thanks
My soon to be ex wife and I purchased land together while married in CA. She contributed 90% of the down payment from separate property (but to complicate the matter, the proceeds of the supposed separate property were distributed to both our names and to my SSN as part of a 1031 exchange so that may transmute the SP to CP right there, anyone know?). We then paid the land-only loan off completely with a new loan for a home we built on the property. The intent was certainly for the home to be community property, but now in divorce the is trying to get 100% of her DP out of the home. I claim that the home was purchased solely from a community property loan but she is trying to claim that the land purchase is separate. The title is now for the home and the land not the land and home separately. I believe it is 100% community property, does anyone know if that is the case in CA? Thanks
Hi Wally,
Your ex-wife purchased the separate property and made the mortgage payments from her own funds. No portion of the community funds was used to either acquire the property or pay the mortgage on it, right? In that case, I think the property will be considered as a separate property even though the proceeds from the sale of this property were distributed among both you and her.
The new home built on the land that you purchased along with her is a community property. The land was purchased separately and the loan against it was paid off separately. It is true that the current mortgage has both the land and the title as collateral, but they were purchased separately. The fact that your ex-wife made 90% of the down payment when the land was bought will be taken into consideration when the community property ownership will be determined. However, I suggest you to contact a divorce attorney in this regard as he is the best person to advice you in this situation.
Your ex-wife purchased the separate property and made the mortgage payments from her own funds. No portion of the community funds was used to either acquire the property or pay the mortgage on it, right? In that case, I think the property will be considered as a separate property even though the proceeds from the sale of this property were distributed among both you and her.
The new home built on the land that you purchased along with her is a community property. The land was purchased separately and the loan against it was paid off separately. It is true that the current mortgage has both the land and the title as collateral, but they were purchased separately. The fact that your ex-wife made 90% of the down payment when the land was bought will be taken into consideration when the community property ownership will be determined. However, I suggest you to contact a divorce attorney in this regard as he is the best person to advice you in this situation.
I live in AZ a community property state. I had contributions to my 401k of $2100 prior to marriage and additional contributions of $4900 after marriage. The value of the fund today is $11000. How do I calculate the amount of gain in value is attributed to my separate property of $2100 and what is attributed to the community?
Hi Mitch!
Welcome to forums!
The portion of the amount which your spouse contributed to the 401k fund will be considered as community property. The amount that you had in the account prior to your marriage and the amount that you contributed after marriage will remain yours.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
The portion of the amount which your spouse contributed to the 401k fund will be considered as community property. The amount that you had in the account prior to your marriage and the amount that you contributed after marriage will remain yours.
Feel free to ask if you've further queries.
Sussane
if a mortgaeg note is in your spouse name and you modifiy the loan while you are married, does the loan now become community property?