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 Guest,
The loan cannot become a community property. The house will definitely become a part of the community property if the mortgage is paid off from the community funds.
Thanks
The loan cannot become a community property. The house will definitely become a part of the community property if the mortgage is paid off from the community funds.
Thanks
the formula for comuity in a propertyand ware the imputs go
Hi Guest,
Go through the given page in order to find out the formula to calculate community property interest:
http://www.mortgagefit.com/know-how/about7063.html (check out miller_st's post)
Take care.
Go through the given page in order to find out the formula to calculate community property interest:
http://www.mortgagefit.com/know-how/about7063.html (check out miller_st's post)
Take care.
My husband bought a condo worth $200,000 before getting married. Now I want to divorce and would like to know if his mortgage payments are part of the community property. He uses his own checking account for the payments and some bills. I pay some other bills and I pay all the food and basic needs form the house. Am I entitled to something?
Hi nena,
As the condo was bought before your marriage and the mortgage payments have been made from your husband's checking account, I don't think you would be able to claim community property interest in the said property.
Thanks
As the condo was bought before your marriage and the mortgage payments have been made from your husband's checking account, I don't think you would be able to claim community property interest in the said property.
Thanks
if property purchased prior to marriage is sold by purchaser, those funds are put into joint acct when marriage takes place, then property is purchased during the marriage. upon divorce, how would moore/marsden apply?
As far as I know, though the money has been placed in the joint account, yet you should get the whole amount. However, it would be better if you could contact an attorney who has expertise in the field of Moore Marsden law and get his opinion in this matter.
Hi...What if community funds are contributed toward a SP business of one of the spouses? Does the Moore/Marsden rule only apply to real estate?
As far as I can understand, as the community funds are contributed towards the business, the spouse can claim a share from it.
Dear Jessica,
I am writing this on behalf of a good friend who wanted to know the answers to the following two questions:
1. If the ex spouse had down work on the property, such as roofing and plumbing, is that subtracted from the CP?
2. If a property has depreciated since the time of marriage, how do factor the depreciation?
thank you for you time and consideration
I am writing this on behalf of a good friend who wanted to know the answers to the following two questions:
1. If the ex spouse had down work on the property, such as roofing and plumbing, is that subtracted from the CP?
2. If a property has depreciated since the time of marriage, how do factor the depreciation?
thank you for you time and consideration
Hi GF,
Your query has been replied to in the given page:
http://www.mortgagefit.com/annoucements/about43405.html
Take a look at it. Hope it helps you.
Thanks
Your query has been replied to in the given page:
http://www.mortgagefit.com/annoucements/about43405.html
Take a look at it. Hope it helps you.
Thanks
hi jessica
i am writing to you on behalf of my friend.
we have two questions.
1. If work is done on a property, is it subtracted from the CP?
2. What is negative depreciated property? Negative in value and how do you factor that out?
thank you
2.
i am writing to you on behalf of my friend.
we have two questions.
1. If work is done on a property, is it subtracted from the CP?
2. What is negative depreciated property? Negative in value and how do you factor that out?
thank you
2.
I live in Arkansa and my husband restuctured a mortgage on his land and had made one payment before we were married. I paid half of all the rest of the mortgage with my husband. He died intestate in 2008. How does this affect my inheritance as his widow?
hi bf,
as far as i know, you'll be able to subtract the work done on the property from the community property interest. negative depreciation or depreciation means the decline in the value of the assets. you can appraise the property and check out the appraised value of the property. this will help you in knowing whether or not the property has depreciated in value.
to linda,
as you're the heir to the property, you will be able to file an affidavit of heirship at the county recorder's office and get the property transferred in your name. then, you can refinance the mortgage and pay off the loan.
as far as i know, you'll be able to subtract the work done on the property from the community property interest. negative depreciation or depreciation means the decline in the value of the assets. you can appraise the property and check out the appraised value of the property. this will help you in knowing whether or not the property has depreciated in value.
to linda,
as you're the heir to the property, you will be able to file an affidavit of heirship at the county recorder's office and get the property transferred in your name. then, you can refinance the mortgage and pay off the loan.
I have a property in a trust that I took out to get a loan on during a marriage. The property was paid off at the time of the loan. Since then the property has lost value and the ex is trying to claim reimburesment for payments made towards the property. I have tried to calculate hwo much interest she could claim on this property since I say she owes for half the loan and she is wanting to walk away and leave me with the balance.
Please advise.
Please advise.