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,
Your ex will be able to claim a portion of the equity in the property depending upon the amount she or he invested in the property. You should contact your divorce attorney and he will help you in calculating the amount you need to pay to your ex.
Thanks
Your ex will be able to claim a portion of the equity in the property depending upon the amount she or he invested in the property. You should contact your divorce attorney and he will help you in calculating the amount you need to pay to your ex.
Thanks
My husband soon to be ex purchase the house 3 years before we married and paid $215,000. for it we married in 2002 in 2003 I sold a house that I owned as seperate property when I did that I put $100,000. down on the loan and he got it refinanced. He told me they were putting my name on the title but that didn't happen (I didn't know that until now) the value of the house when we got married was $546,000. and as of the date he filed for divorce is was $586,000. What is the Moore Marsden calculation with those figurers?
Thanks,
Carol
Thanks,
Carol
In my opinion, you should get in touch with your divorce attorney and he will be able to help you in a better manner with the calculations.
I owned the house before marriage, got married (but spouse's name was never on paperwork of house) and was married 5 years. During that time, I refinanced the house to buy him a truck which was paid in full for (10K). Then the market dropped out and the house is now upside down, would I be correct in assuming that the spouse who was not on the paperwork and no longer living in the house, would not be receiving any money from Moore Marsden interest?
Hi LJY!
Welcome to forums!
As the property is in your name and you purchased it before your marriage, I don't think your spouse will be able to claim any interest in the property.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
As the property is in your name and you purchased it before your marriage, I don't think your spouse will be able to claim any interest in the property.
Feel free to ask if you've further queries.
Sussane
i understand the whole Moore Marsden aspect but what happens if you sell the first house the funds go into a joint account to purchase another home. We where married at the time and my name is on title. Does the Moore Marden stand? Thank you
Welcome justine,
As far as I can understand, Moore Marsden rule will come into affect in your case.
As far as I can understand, Moore Marsden rule will come into affect in your case.
My spouse came into our marriage in 1988 with a house she had purchased in about 1974. From 1988 until the mortgage was completely paid off in 2004 (and thereafter), she handled all the household bookkeeping. Each month she would present me with an itemized bill for my half of household expenses (mortgage, insurance, utilities, cable, cleaning lady, etc.). One of those line items was, every month for 16 years, my half of the mortgage payment. I always wrote a check to her from my own separate checking account to cover my half of our monthly household bills. We are now divorcing. Does the fact that I paid out of my own account (rather than a joint account being used), and always wrote the check payable to her, negatively impact any equity interest that might otherwise accrue to me under Moore-Marsden?
When the nonpaying partner dies, is his/her half of mortgage burden paid on his/her behalf considered a debit on his/her estate? It was paid by one for 20 years.
Normally, it becomes the responsibility of the surviving partner to pay off the mortgage in full.
we bought the house and married in 2002 for $342,000, deposit was from my ex separate property $62,000 with loan of $274,000. during 3 years we paid $15,000 to the principal and refinance house in 2005 with cash out of $65,000 with the mortgage of $330,000. how to calculate community and separate property in this case? now mortgage is $300,000
Hi Guest,
You should contact a real estate attorney who is well versed with the community estate laws of your state and he will help you in calculating this.
You should contact a real estate attorney who is well versed with the community estate laws of your state and he will help you in calculating this.
I have this scenario that maybe someone can help clarify:
Single man buys a home for $50,000 many years ago. Ten years later he gets married at which point the house is worth $120,000. Over the next few years him and his wife make interest payments of $7,000. They payoff the house with a lump sum of $20,000 which was inherited to him. The current value of the house is $300,000.
The way I calculate this is cp% = 14% and MApp = $180,000.
Total community property is $32,200 and her 1/2 would be $16,100.
But what about the last payoff amount of $20,000 which was interited to him. Does that come into play? Also, when house was paid off it had a value of approx $200,000. Should that be used instead of the current value of $300,000 since no payments have been made since?
Thanks
Single man buys a home for $50,000 many years ago. Ten years later he gets married at which point the house is worth $120,000. Over the next few years him and his wife make interest payments of $7,000. They payoff the house with a lump sum of $20,000 which was inherited to him. The current value of the house is $300,000.
The way I calculate this is cp% = 14% and MApp = $180,000.
Total community property is $32,200 and her 1/2 would be $16,100.
But what about the last payoff amount of $20,000 which was interited to him. Does that come into play? Also, when house was paid off it had a value of approx $200,000. Should that be used instead of the current value of $300,000 since no payments have been made since?
Thanks
Hi James,
As far as I can understand, the property value of $200,000 will be taken into consideration while calculating community property rights. As Adonis has suggested in his above post, it's better to take help of an attorney regarding laws of your state and then take a decision in this matter.
Thanks
As far as I can understand, the property value of $200,000 will be taken into consideration while calculating community property rights. As Adonis has suggested in his above post, it's better to take help of an attorney regarding laws of your state and then take a decision in this matter.
Thanks
I bought a home in my name alone (w/his signature on quitclaim deed) while we were married. We refinanced last year to do improvements and put his name on deed to get the loan. We are now getting divorced. The home has lost so much value that either we owe more than it is worth or we may have about $100,000 equity in it. Many payments from the time I purchased it (in my name alone) were made from community property, and definitely all the payments made after the refi were made from community property. How is the interest calculation done in a case like this? Does he have a claim to the payments made from community property before his name was on the deed?