One of the first issues I often encounter during a consultation is a party who believes that because he or purchased a home before the marriage, that the home automatically and entirely belongs to him. That may be true, but it requires analysis.
Under California law, property you owned before marriage is generally your separate property. But if you continued to own the home during the marriage, used community funds to pay the mortgage, refinanced the property, added your spouse to title, or made substantial improvements during the marriage, your spouse may have acquired an interest in the property.
That does not necessarily mean the house became 50/50 or community property. It means we have to look more closely at what happened during the marriage.
The Starting Point: Property Owned Before Marriage Is Separate Property
California Family Code section 770 provides a presumption that property owned by a person before marriage is that person’s separate property. So, if you purchased a home before getting married and the home remained in your name, we generally start with the position that the home is your separate property.
But that is only the starting point. In a divorce, we have to look at what happened after you got married for the next step of the analysis.
We Paid the Mortgage During the Marriage
This is where things can become complicated. In California, income earned by either spouse during the marriage is generally community property. This is California Family Code section 760. So, even if you owned the house before marriage, if mortgage payments were made with your earnings during the marriage, community property may have been used to pay expenses associated with your separate property home. That means the community acquired an interest in the house. It does not mean your spouse now owns half of your house.
Not every mortgage payment creates a community property interest. Payments toward principal can create an ownership interest because they build equity in the property. Payments for interest, property taxes, insurance, and ordinary maintenance generally do not create that same ownership interest.
This is commonly referred to as a Moore/Marsden calculation, named after two California cases that established the method courts use to determine the community’s interest in a separately owned home. The calculation can become complicated because it takes into account the amount of principal paid with community funds and the property’s appreciation during the marriage. Forensic Accountants are helpful in efficiently determining what this amount is.
What If I Made the Down Payment Before Marriage?
If you purchased the home before marriage, your premarital equity generally remains an important part of your separate property claim. There may be situations where Family Code section 2640 comes into play; these are reimbursement rights for certain separate property contributions to the acquisition of community property, assuming the right to reimbursement has not been waived. This can become particularly important if the character of the property changed during the marriage. The key is being able to trace the money.
Closing statements, bank records, mortgage statements, refinance documents, and other financial records can become extremely important. Save and find everything!
What If I Added My Spouse to the Deed?
This is one of the most important questions we ask. Sometimes a spouse buys a house before marriage and, years later, adds the other spouse to title. This often happens during a refinance or because the couple believes that putting both names on title is simply what married couples are supposed to do. But changing title can have significant legal consequences.
California Family Code section 852 governs transmutations, which are agreements between spouses that change the character of property. For example, from separate property to community property. Whether a valid transmutation occurred depends on the particular documents and circumstances. Simply being married does not transform your separate property into community property, and every title change does not necessarily produce the result one spouse may assume. Here, the actual deed, refinance documents, and other written agreements need to be carefully reviewed. Again, save and find everything.
What If We Refinanced the House During the Marriage?
Refinancing does not automatically make a separate property house community property. However, refinancing can raise important issues, particularly if title was changed at the same time.
If you refinanced your premarital home during the marriage, we will want to review:
- How title was held before the refinance;
- How title was held afterward;
- Whether your spouse was added to the deed;
- Whether you signed any documents concerning ownership of the property; and
- What happened to the refinance proceeds.
Do not assume that because both spouses signed loan documents, the house necessarily became community property. The loan and ownership of the property are related issues, but they are not always the same issue.
What If the House Increased Significantly in Value?
This is another common concern, especially in California. Imagine you purchased a house for $600,000 before marriage. By the time you divorce, it is worth $1.5 million. Who receives that increase in value? The answer depends on the circumstances.
If the property remained entirely separate and the community did not contribute toward the mortgage principal, the appreciation may remain separate property. But if community earnings were used to reduce the mortgage principal during the marriage, the community may be entitled to a portion of the appreciation under the Moore/Marsden formula. That does not necessarily mean the appreciation is divided equally. The calculation is intended to allocate the respective separate and community interests in the property.
Documents Matter
If you owned your home before marriage and are now going through a divorce, start gathering your records as early as possible. Helpful documents include your original purchase agreement and closing statement, deeds, mortgage statements, refinance documents, bank statements showing the source of your down payment, records of principal payments, and documents relating to major improvements. Even if the house was purchased 10 or 20 years ago, those records can make an enormous difference.
The Bottom Line
If you owned your home before you got married, do not automatically assume that you have to split the entire house with your spouse. Similarly, do not assume that having purchased the home before marriage ends the analysis.
California property division can become complicated when separate and community funds are mixed over the course of a marriage. The outcome may depend on when the property was purchased, how title was held, whether title changed, how the mortgage was paid, and whether the community acquired an interest in the property’s appreciation.
At The Soleymani Law Firm, APC, we regularly handle California divorce cases involving separate property homes, Moore/Marsden calculations, Family Code section 2640 reimbursement claims, tracing issues, and complex property division. We understand that your home may be one of your largest financial assets and often one of the most emotionally significant assets involved in your divorce.
If you owned your home before marriage and are concerned about what will happen to it in a divorce, The Soleymani Law Firm, APC can help you understand your rights, determine the separate and community interests in the property, and protect what you are entitled to under California law.
This article is for general informational purposes only and does not constitute legal advice. Every situation is different, and individuals should consult with a qualified California family law attorney regarding their specific circumstances.