The general rule when it comes to dividing marital property at dissolution, also referred to as community property, is equal division. For example, if a married couple purchases a home together, each party is entitled to a one-half interest in the equity of that home they purchased together. However, these days it is not uncommon for one spouse to enter a marriage having already purchased a house. Imagine a situation in which one spouse (Spouse A) purchases a house before marriage. Spouse A makes the down payment, and starts paying the mortgage. Spouse A then marries Spouse B; they continue to make mortgage payments on the house. Spouse A and B then decide to get divorce. The question is how much of the equity in the house is each spouse entitled to? Under the law, when community funds are used for mortgage payments on property purchased by one of the spouses before marriage, the community acquires a pro-tanto interest in the ratio that the payments on the purchase price made with community funds bear to the total payments on the purchase price, and any appreciation must be apportioned accordingly. (Marriage of Moore, 28 Cal. 3d. 366 (1980)). The approach, further clarified in the Marriage of Marsden 130 Cal. App. 3d 426 (1982), indicates that the community interest is determined by the ratio that the payments on the purchase price made with community funds bear to the total payments on the purchase price. Similarly, the separate interest is determined by the ratio that the payments on the purchase price mad with separate funds bear to the total payments on the purchase price. Going back to our interest above, Spouse A is entitled to one half of the community interest and the separate interest. Spouse B, is entitled to one half of the community interest.
As a practical matter, the following are the “key figures” that each spouse needs to determine their respective interest: (1) purchase price, (2) amount of down payment, (3) amount of payments on loan principal made with separate funds, (4) amount of payments on loan principal made with community funds, (5) fair market value of the house at date of marriage, and (6) the fair market value at time of division. While an appraiser can determine the value of the house at various points and time, it is critical that spouses keep accurate records of mortgage payments in order to accurately assess their separate and community interest.
If you or someone you know is going through a divorce, our team of attorneys at Sagaria Law can help assess your interest in marital property under varying circumstances. Moreover, our office deals with all aspects of family law including divorce, property settlement, child custody, child and spousal support. We represent clients throughout the bay area and have offices in Santa Clara, Alameda, and Monterey County. Contact our office to schedule a free consultation with one of our attorneys today.