In California,
whose name appears on the deed is the
beginning of the inquiry, not the end
of the story.
There is
often a significant community
property interest in real property
even if it was purchased prior to
marriage as the "sole and separate
property" of one of the parties.
Likewise,
there is often a significant separate
property right to reimbursement in real
property - even if it was purchased
during marriage and title held as "Husband
and Wife, as Community Property".
When parties
hold joint title prior to marriage,
and one paid more of the expenses (including
the interest on the mortgage) prior to
marriage, that party may be entitled to
an accounting that results in a significant
reimbursment of monies expended on the
property prior to marriage.
There
are several presumptions concerning real
property. If the property is held
by the parties in joint form, for
example, it is presumed to be community
property.
To learn
more about community
property and separate
property interests in your real property,
we will need to examine the history of
the property.
Proper
Preparation Protects your Assets
Community
Property Interest in Property purchased
prior to marriage by one spouse as that
spouse's "sole and separate"
property
If
the community pays down the mortgage balance,
or the property is refinanced during marriage,
the community will obtain an interest
in separate property purchased prior to
marriage as the "sole and separate"
property of one spouse.
If one
of the spouses brings to the marriage
a residence that is subject to an encumbrance,
which encumbrance is paid in whole or
in part with community property during
the marriage, the property, while remaining
separate, will develop a community property
interest that must be divided. The calculuation
of this interest is sometimes referred
to as the Moore-Marsden interest in the
property. In re Marriage of Moore
(1980) 28 Cal. 3d 366; In re Marriage
of Marsden (1st Dist. 1982) 130 Cal.
App. 3d 426.
Where
a community loan is used to pay off mortgage
on separate property, the parties' respective
interests must be determined. To calculate
the separate property interest in the
residence which one spouse purchased immediately
prior to marriage, divide the separate
property contributions (down payment and
loan amount minus amount by which community
property payments reduced principal balance
of loan) by the purchase price of the
property; to determine the community property
interest, divide the amount by which community
property payments reduced the principal
by the purchase price. The community and
separate property percentages can be multiplied
by the total appreciation of the property
during marriage to calculate the parties'
respective financial interests. Be aware
that if the purchase money loan was paid
off because the parties refinanced during
the marriage, this can dramatically change
the calculations.
In
general, the community property interest
in the home is computed by dividing the
community's contribution to the purchase
price of the home by the purchase price.
Where the community borrowed money to
pay off the purchase money loan, as with
a refinance during the marriage, this
may include the amount of the original
loan paid off by the new community loan.
This percentage is then multiplied by
the appreciation of the home during the
years of the marriage.
To
calculate this interest one must know,
at a minimum:
•
how title to the property was held
—
during the marriage
—
now
• the original purchase price
•
the amount of the down payment
•
the source of funds used for the down
payment
•
the date of the marriage
•
the amount of mortgage principal paid
— during marriage
—
after separation
•
the date of separation
•
the fair market value of the property
on
—
date of marriage
—
date of separation
—
date of trial
•
whether the property was refinanced during
the marriage
Right
to Reimbursement of Separate Property
Utilized towards the Purchase of Community
Property or towards the Purchase of the
Separate Property of the Other Spouse.
In
the division of the community estate,
unless a party has made a written waiver
of the right to reimbursement or has signed
a writing that has the effect of a waiver,
the party must be reimbursed for the party's
contributions to the acquisition of the
property to the extent the party traces
the contributions to a separate property
source.
The amount
reimbursed will be without interest or
adjustment for change in monetary values
and may not exceed the net value of the
property at the time of the division.
Contributions
to the acquisition of the property include
down payments, payments for improvements,
and payments that reduce the principal
of a loan used to finance the purchase
or improvement of the property but do
not include payments of interest on the
loan or payments made for maintenance,
insurance, or taxation of the property.
Family Code, section
2640.
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