ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Separating Community Interest In Separate Property In California

Updated on December 10, 2012
Separating Community Interest In Separate Property In California
Separating Community Interest In Separate Property In California

Community Property

The State of California is a community property state when it comes to the division of property during divorce proceedings. Generally, in community property states, property acquired during marriage, except for gifts and inheritances, is owned jointly by both spouses and is divided equally upon divorce or annulment.

Thus property owned by one spouse before marriage is generally considered the separate property of that spouse. However, when couples get married they begin spending the money and resources they accumulate together on the things they already owned, including the property owned by one spouse before the marriage. The question then becomes, what interest does the “community” have in the separate property if the couple should divorce? In California, this question was answered by the California Supreme Court and has become known as the Moore/Marsden formula.

The California Supreme Court Set Out A Formula To Determine The Community's Interest In Separate Property
The California Supreme Court Set Out A Formula To Determine The Community's Interest In Separate Property

The Supreme Court cases

The Moore/Marsden formula was created by the California Supreme Court’s rulings in two separate cases: In re Marriage of Moore (1980) 28 Cal.3d 366 (Moore) and In re Marriage of Marsden(1982) 130 Cal.App.3d 426 (Marsden).

In the Marsden case, the Court clarified a rule set out in the Moore case and adopted a method of calculating the community’s interest in separate property that has now become the standard for answering such questions. The Court decided that when the Community makes a payment to a separate property asset, the community gains an interest in that property and must be reimbursed during divorce proceedings.

The Moore Marsden Formula Calculates The Community's Interest In Separate Property
The Moore Marsden Formula Calculates The Community's Interest In Separate Property

The Moore/Marsden Formula

In deciding the Moore/Marsden cases, the Court set out a formula to determine what interest the community has in a separate property asset.

The formula is as follows:

CP = PPCP + (CP% x MAPP)

In the formula:

CP stands for Community Property Interest;

PPCP stands for payments towards the Principal from community;

CP% stands for the Community Property Percentage with is PPCP/purchase price; CP%: Community property percentage = PPCP / Purchase Price

And MAPP stands for appreciation of the separate property asset during marriage.

The Separate Property formula is:
SP = DP + PPSP + Pre-MAPP + (SP% x MAPP)
In this formula:

SP stands for Separate Property;

DP stands for the down payment on the property;

PPSP stands for payments towards the Principal from separate property;

Pre-MAPP stands for Pre-marriage appreciation;

SP% stands for Separate property percentage with is 100% - (PPCP/Purchase Price)

When The Formula Is Complete, The Community Is Reimbursed For Money Spent On Separate Property
When The Formula Is Complete, The Community Is Reimbursed For Money Spent On Separate Property

An Example

“A” purchased a home for $200,000 in 1992 prior to getting married.  “A” made a down payment of $50,000 and borrowed the remaining $150,000.  “A” paid $20,000 in principal before getting married in 1997 to “B”.  The fair market value of the home in 1997 was $300,000.

During the marriage, “A” and “B” paid $30,000 towards the principal from community property.  When “A” and “B” separated in 2005, the fair market value of the home was $500,000.

Applying the Moore/Marsden formula:

The CP% = $30,000/$200,000 = 15%

The Separate property interest for “A” is 100%- 15% = 85%.

Community property interest = PPCP + (CP% x MAPP)
= $30,000 + (15% x $200,000)
= $30,000 + $30,000
= $60,000

As the community interest is divided in half, both “A” and “B” will get = ($60,000/2) = $30,000 each.

“A’s” separate property interest = DP + PPSP + Pre-MAPP + (SP% x MAPP)
= $50,000 + $20,000 + $100,000 + (85% x 200,000)
= $170,000 + $170,000
= $340,000

On separation and divorce, “B” gets: $30,000 as community interest in the property.
And, “A’s” community and separate property interests = $340,000+ $30,000 = $370,000

The Principal balance of the loan to be paid off by “A” = $150,000 - ($20,000 + $30,000) = $100,000

So, when a couple divorces in a community property state like California, the court will awards the community interest to each spouse and 100% separate property to the spouse who bought the property with separate funds.

Disclaimer

Dena Bez is a licensed California Attorney whose practice focuses on family law including divorce, custody disputes, domestic partnership issues and estate planning.

This Article is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using the article or the information contained in the article you understand that there is no attorney client relationship between you and the publisher. Any information in the article should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Comments

    0 of 8192 characters used
    Post Comment

    • Dena Bez profile imageAUTHOR

      Dena Bez 

      5 years ago from Sacramento, California

      Depends on the State.

    • profile image

      vkc 

      7 years ago

      Interesting info. Does this same formula give the surviving spouse first a "community interest" in separate property assets in the deceased spouse's estate, before the balance is disbursed as "separate property"? Or do Probate intestate rules trump?

    • profile image

      Slugger 

      8 years ago

      Thank you for the informative article but I am still a bit confused. What happens when dividends (or income) from a separate business asset are deferred (or reinvested) in the business?

    • scla profile image

      scla 

      8 years ago from Southern California

      Thanks for providing detailed explanations. It helps a lot of people understand how community property and separate property work in California.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)