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.
One house was purchased before marriage that I rented out. I exchanged that, after marriage, with a home I also rented and then shared with my ex. He is an attorney, and signed an Interspousal Transfer Grant Deed, relinquishing all rights to title, possession, interest including but not limited to, community property interest then and forever more. We did pay mortgages from our joint account, but we had an interest only loan, meaning he did not pay down any capital.
Hi,
"He is an attorney, and signed an Interspousal Transfer Grant Deed, relinquishing all rights to title, possession, interest including but not limited to, community property interest then and forever more."
If he signed an interspousal transfer grant deed and relinquished all his interests and rights to the property, he does not have an interest in the property. Moreover, since it's an interest only loan, he never contributed towards the principal. I don't think he can claim any share of the property. He has given up all his rights and he cannot reclaim them, unless you give them back to him.
"He is an attorney, and signed an Interspousal Transfer Grant Deed, relinquishing all rights to title, possession, interest including but not limited to, community property interest then and forever more."
If he signed an interspousal transfer grant deed and relinquished all his interests and rights to the property, he does not have an interest in the property. Moreover, since it's an interest only loan, he never contributed towards the principal. I don't think he can claim any share of the property. He has given up all his rights and he cannot reclaim them, unless you give them back to him.
My fiance and I are purchasing a house 1 month prior to getting married (found it, had to have it, coudn't wait). We're both contributing to closing costs and will be paying the monthly mortgage payments out of a joint account we both deposit into. However, I cannot be on the deed becuase it is a VA loan (no money down) and we're not officially married. What kind of claim would I have to the property if we get divorced?
Secondly, he's military, so our home is currently in California (community property state) but if we move, is the Moore Marsden rule & community property rule applied based on the location of the property? Or on the state in which you get married? i.e. would this rule even apply if we moved and ended up getting divorced in another state?
Secondly, he's military, so our home is currently in California (community property state) but if we move, is the Moore Marsden rule & community property rule applied based on the location of the property? Or on the state in which you get married? i.e. would this rule even apply if we moved and ended up getting divorced in another state?
Rule is applicable only in case of states where the community property division exists
amount that you will be paying right now will not be considered for Moore Marsden Rule.
you can arrange an agreement as a safeguard.
amount that you will be paying right now will not be considered for Moore Marsden Rule.
you can arrange an agreement as a safeguard.
Hi,
I am married, and want to buy a property in California, it is a 100% CASH purchase, and the money will come from my own bank account, they were earned before marriage. So there will be no mortgage, I am also planning to pay the property tax and utility bills from the same pre-marriage account with previously earned funds.
My wife refuses to sign the interspousal transfer deed at time of purchase.
Will i have 100% of the house and it's appreciated value in case if I divorce later ? Assuming no community funds will be ever used to maintain the house. Will my wife have anything after divorse ?
Thank you very much - i need thi info ASAP.
I am married, and want to buy a property in California, it is a 100% CASH purchase, and the money will come from my own bank account, they were earned before marriage. So there will be no mortgage, I am also planning to pay the property tax and utility bills from the same pre-marriage account with previously earned funds.
My wife refuses to sign the interspousal transfer deed at time of purchase.
Will i have 100% of the house and it's appreciated value in case if I divorce later ? Assuming no community funds will be ever used to maintain the house. Will my wife have anything after divorse ?
Thank you very much - i need thi info ASAP.
hi im a bit confused how my spouse came to a figure to buy me out of our house. We had a real estate agent give us a valuation i think it was $340000. He ended up paying me $62000. Was this based on how much we had already paid off the mortgage??? We had been paying off the mortgage for 8 years.
I live in California. My ex to be bought the house in 1987. We married in 1990. When he refinanced in 1997 he coerced me into signing a quit claim. He says I have no right to any interest in the house at all. I think I understand how the MMrule is calculated but this quit claim thing bothers me.
Thanks, Lucie
Thanks, Lucie
I was married 4/28/2001. The home is my seperate property. My wife does not earn any income. We seperated 6/21/2009. The mortgage was paid from my income only. Mortgage paydown is $65,000. The value of the home has gone down approximateky $50,000. What would the community interest be?
Thank you
Thank you
Hello, I live in California. Divorcing, and have Moore-Marsden calc for my separate property residence. Community has $40K interest. How to handle the $102K recent HELOC balance? So far lawyer suggests I am solely responsible. THANKS.
hi,
who took out the heloc loan? i believe the heloc loan was taken against the community property while you were married. am i correct? if the answer is yes, i think both you and your spouse are responsible for the home equity loan and it should be taken into account while the community interest is calculated.
who took out the heloc loan? i believe the heloc loan was taken against the community property while you were married. am i correct? if the answer is yes, i think both you and your spouse are responsible for the home equity loan and it should be taken into account while the community interest is calculated.
Thanks for the reply savior70. The HELOC was opened by me with 70% of the proceeds spent by the community. The court has confirmed the residence as my separate property, but I feel now I'm stuck with the $102K as it is not anywhere int he accounting. Could it be used to offset the community interest $40K?
Can MApp be a negative number if the property depreciated during the marriage? If so, how is that rationalized as being fair when community assets are used to pay off debt on a separate party investment, and the community gets nothing out of it simply because the separate party investment went south? Thanks.
To anon,
If the home equity line of credit is in your name, you are responsible for it. You will have to pay it off. Otherwise, your credit will be affected. If your community interest in the property is $40k, you can use the money to repay the debt.
To anony,
"….how is that rationalized as being fair when community assets are used to pay off debt on a separate party investment."
If the property depreciates in value, the MApp or appreciation during marriage can be negative in value. But why would the community assets be used to pay off debt on the third party investment? If the debt is not a liability of the community property, its assets should not be used to repay the third party investment debt.
If the home equity line of credit is in your name, you are responsible for it. You will have to pay it off. Otherwise, your credit will be affected. If your community interest in the property is $40k, you can use the money to repay the debt.
To anony,
"….how is that rationalized as being fair when community assets are used to pay off debt on a separate party investment."
If the property depreciates in value, the MApp or appreciation during marriage can be negative in value. But why would the community assets be used to pay off debt on the third party investment? If the debt is not a liability of the community property, its assets should not be used to repay the third party investment debt.
Thank you for your response, Jenkin7.
To answer your question, my spouse used community money to pay off separate property debt because he did not realize that the money he was using was coming out of an account that would be considered community.
I am troubled that MApp can be negative, though. Take another situation in which separate property is transmuted into community property during the marriage. Does negative MApp mean that if my spouse chose to use community money to pay-off early the mortgage of his transmuted property, and then the property depreciated below its value at the time it was transmuted, the community has effectively lost all the money that was used for the early pay-off? That does not seem right. He reaps all the appreciation that occurred prior to transmutation, uses community money to pay off remaining debt, and has no real losess since the time of transmutation since it's all on-paper until the property is actually sold. Yet, the community DOES have a loss?
What are my options in this case?
Thank you.
To answer your question, my spouse used community money to pay off separate property debt because he did not realize that the money he was using was coming out of an account that would be considered community.
I am troubled that MApp can be negative, though. Take another situation in which separate property is transmuted into community property during the marriage. Does negative MApp mean that if my spouse chose to use community money to pay-off early the mortgage of his transmuted property, and then the property depreciated below its value at the time it was transmuted, the community has effectively lost all the money that was used for the early pay-off? That does not seem right. He reaps all the appreciation that occurred prior to transmutation, uses community money to pay off remaining debt, and has no real losess since the time of transmutation since it's all on-paper until the property is actually sold. Yet, the community DOES have a loss?
What are my options in this case?
Thank you.
Hi anony,
It is indeed a complicated situation. If the property depreciated in value after it was considered as a community property, the MApp or the appreciation during marriage will be zero. But the mortgage on the property was paid from community funds. The money that was spent from the community funds should be taken into account while the community interest is calculated. However, I am not sure how your ex used the community funds to pay off mortgage on a property that was considered as his separate property, unless you authorized him to do so. I think you should consult an attorney as he/she is the best person to guide you regarding how exactly you can calculate your share of the community property interest.
It is indeed a complicated situation. If the property depreciated in value after it was considered as a community property, the MApp or the appreciation during marriage will be zero. But the mortgage on the property was paid from community funds. The money that was spent from the community funds should be taken into account while the community interest is calculated. However, I am not sure how your ex used the community funds to pay off mortgage on a property that was considered as his separate property, unless you authorized him to do so. I think you should consult an attorney as he/she is the best person to guide you regarding how exactly you can calculate your share of the community property interest.