A divorce is an extremely complicated issue. Emotionally, it’s the heartbreaking division of a once hopeful marriage, often one that directly involves young, impressionable children.
Simply deciding to get divorced, while working your way through the emotions, is difficult and confusing enough.
Then there is the legal side of a divorce. As if navigating the emotions is not difficult enough, couples and their legal support need to sort the details of child support, custody, and the division of property.
For dividing property, one of the most troublesome assets is the home. Who gets to stay in the home? If the home is sold, who gets what share of the proceeds? If the home is not sold, does one party receive payment? These issues are incredibly complex.
It can become even more complex (as if we needed that!) when one of the spouses owned the property before getting married and, during the marriage, a portion of the mortgage was paid off.
One system used to sort out a small aspect of a divorce is the “Moore Marsden calculation.” This system is often used when attempting to settle a divorce that involves real estate.
Note: This article is for general information and entertainment only, and should not be considered legal advice in any way. While we are experts in mortgage and real estate; we are not legal experts in any fashion. Always talk with a qualified attorney before making any decisions regarding your divorce and the division of property.
Understanding the Moore Marsden Calculation
“Community” and “Separate” Property in a Divorce Settlement
To understand the Moore Marsden calculation, we first need to understand the difference between community and separate property in a divorce settlement.
When a marriage ends in divorce, all property is divided into two broad categories: community and separate property. Each state will have different definitions of the two, but in California community property generally includes all property acquired during the marriage. Community property, in most cases, is divided evenly. A house purchased during the marriage is, under most circumstances, community property.
Separate property, on the other hand, is defined as property acquired before the marriage or after the divorce. Property that is acquired during the marriage as part of an inheritance is considered separate property. For example, if you inherit your grandfather’s mint-condition first-generation Ford Mustang during a marriage, it would be separate property. If you inherit your mother’s antique jewelry while married, it will likely be separate property.
There is also a concept of “quasi-community” property, but, for the sake of simplicity, we’ll leave that out of this discussion.
So property (in this discussion) is either separate or community. But what happens when a house was purchased with a mortgage before the marriage, but during the marriage the mortgage was paid down?
Is a House Community or Separate Property?
California law provides a right to reimbursement for separate property contributions to community property. It also provides a right for community property that contributed to the separate property of a spouse. Currently, the California code requires the use of a formula to calculate each spouse’s interest in real estate that was acquired before the marriage.
If the home was purchased during the marriage, the process is fairly simple. Usually, each gets an equal share of the property, which is considered part of the “community.” (The legal terminology usually says that something “goes to the community,” meaning it’s part of the pot that is split during the divorce. If the “community gets the bank account,” this means it is split.)
If the home was purchased and fully owned before the marriage, California law (to the best of our knowledge) considers it separate property. The person who owned the home before the marriage gets to keep it as their own.
The complicating issue is when the property was purchased with a mortgage, payments were made before the marriage, and payments continued to be made during the marriage. Technically, under the law as we understand it, ownership equity created before the marriage would be separate property, while equity created during the marriage would be community property.
The house and underlying equity can’t be considered separate, as payments were made during the marriage. But it can’t be considered community either, as equity was established before the marriage.
This is where the Moore Marsden formula comes into play.
The Moore Marsden Calculation in Action
California law essentially says that when the married couple pays down the mortgage, the “community” may receive a dollar-for-dollar reimbursement as well as a share of the property’s appreciation from the date of the marriage to the divorce.
Let’s look at an example. Suppose Kelly purchased a home for $400,000 before getting married to Adrian. Before getting married, Kelly made a downpayment of $50,000 and paid an additional $100,000 in mortgage payments. When they got married, the home had appreciated in value to $500,000. As a married couple, Kelly and Adrian made payments and knocked another $100,000 off the principal. When they got divorced, the home was worth $700,000.
With the Moore Marsden calculation, the “community” would receive $100,000. In addition, the “community” would get the appreciated value of $200,000, which was generated during the marriage. However, this would be multiplied by a fraction of $100,000 over $400,000. The community interest would therefore be about $150,000.
These situations become even more complex when the home is sold and a new house is purchased using the equity that was brought to the marriage. As you can see, there is a real need for highly-trained attorneys who can sort through these complex legal issues.
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