You often hear people in the real estate industry say, location is everything when buying real estate. In a divorce, timing is everything. There are three preliminary questions that every lawyer must ask their clients in order to evaluate a client’s real property interests in the marital estate:
1. When was the house acquired? (Before marriage/ during marriage/ after separation)
Any property acquired before marriage or after separation is considered separate property. Anything acquired during marriage is assumed to be community. This is important because it creates an assumption of community or separate property and shifts the burden on the other party to show that they have an interest in the property.
2. What was the source of the funds used to make payments?
Even though you acquired the house before marriage, if payments were made toward the principal amount of the mortgage during the marriage, the community has an interest in the property (both in the amount contributed and the appreciation during marriage) and must be reimbursed accordingly. If the property was purchased during the marriage with separate property funds then it is assumed to be community, and the party claiming a separate property interest will need to be able to trace the source of the funds back to their separate property. The two key cases regarding community and separate property interests in real property are explained by In re Marriage of Moore (1980), 28 Cal.3d 366, and In re Marriage of Marsden (1982) 130 Cal.App.3d 426, which will be discussed in a later post.
3. Is there something in writing that changes the ownership of the real property?
If you change title from your name alone, to both you and your spouse, this may be sufficient to transfer the interest in the property and shifts the assumption created by the date of acquisition. However, when this happens, the value of the property on the date of the transfer will be critical in determining your reimbursement claim for your separate property contribution to the property. On the other hand, if the community transfers title to one spouse, this may be considered a gift from the community to the spouse on title, unless there is proof otherwise.
Real property owners need to be meticulous in determining what how their property was acquired, what funds were used to make payments, and any changes to the property. An experienced family law attorney will be able to help you understand what documents are needed in order to evaluate your interests and help you navigate these concepts to reach your best case scenario.