The marital home is typically one of the most valuable assets to be divided in divorce. In California, unless the spouses agree on the division of community (or marital) property, courts will endeavor to allocate evenly the assets and debts that have been accumulated during the marriage. It is important to keep in mind that parties must pay close attention to whether assets (and debts) are characterized as separate versus community property, since only community property is divisible in divorce. The division of marital property has a tendency to affect both parties financially after divorce. For this reason alone, you are encouraged to contact a local San Diego family law attorney if you are considering divorce.
Interestingly enough, some property may be made up of both separate and community property. A good example of this is a marital home that was purchased prior to a marriage by one spouse. When the couple gets married, they may both make mortgage payments to reduce the loan amount. So what happens to the home in divorce? Under established California law, when community property is applied to reduce the balance of a mortgage on one party’s separate property, the “community” acquires a “pro tanto” interest in the property.
In other words, to determine the separate property percentage interest, one would credit the separate property with the down payment and full amount of the loan, while subtracting the amount by which the parties used community property to reduce the principal balance of the mortgage. In a recent divorce case, the wife challenged the trial court’s findings regarding the couple’s home that the husband owned prior to the marriage.
Here, the parties were married in 2003, and the husband filed for divorce in 2011. Upon entering a judgment of divorce, the court identified the parties’ separate and community property interests, respectively. Among the many items addressed, the court determined that the couple’s marital residence was the husband’s separate property. The wife appealed that determination, arguing that the court erred in issuing the ruling.
According to the facts, the husband purchased the home prior to the marriage. After they were married, the couple lived in the house and made mortgage payments from their community finances. The husband took equity out of the house on a few different occasions, using those funds to pay community expenses. Ultimately, at the date of the separation, the outstanding balance of the mortgage was approximately the same amount as the original loan amount.
The trial court pointed out that the husband purchased the house before the couple got married, and although the community made payments to reduce the loan balance, the house was refinanced several times in order to pay community expenses. As a result, there was no change in the mortgage balance from the time the parties got married to the date of their separation. Therefore, the court concluded that the refinancing did not change the nature of the property from separate to community.
The court of appeals affirmed this part of the decision, pointing out that under the law discussed above, the community property payment did not reduce the loan balance, supporting a conclusion that the marital home remained the husband’s separate property.
This decision, although unpublished, illustrates the importance of understanding how local state divorce laws can affect your financial status. An experienced family law attorney would be able to guide you through the process and work to protect your legal and financial interests. Roy M. Doppelt has been representing parties involved in family law disputes for more than 20 years. Doppelt and Forney, APLC serves clients throughout Southern California, including San Diego, Encinitas, La Jolla, and Chula Vista. For a free consultation, contact Doppelt and Forney, APLC through our website, or give us a call toll-free at (800) ROY IS IT (769-4748).
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