By Warren R Shiell
The following information is specific to California.
In many divorces, the biggest financial question is who gets the family home. Should the wife get it, should the husband, or should they sell it and split the proceeds? And if they sell it how should the proceeds be divided.
Many times, the wife has an emotional tie to the home and she wants to keep it. This is where she raised their children and decorated and entertained. But she needs to consider whether she can afford to keep the home. If she keeps the house she is getting an illiquid asset that does not buy groceries for her children or create any income.
The first issue that must be considered is who owns the house. Is it entirely community property that should be split equally or does one spouse have a claim to a greater share.
Who owns the house?
Often the family home is the most important asset that a family owns. In a divorce the first question that a couple must consider is who owns the family home. Is it entirely community property that should be divided equally or does one spouse have a separate property interest that would result in an unequal division.
In California, there is a presumption that property acquired during the marriage is community property and each spouse is entitled to an equal share upon divorce. However, in the case of the family home this presumption may not apply if title is not in joint names. For example, if a house is purchased during the marriage but only one spouse’s name is on the title that spouse may be able to claim that the entire property is their separate property and that they do not have to share it with the other spouse. FN1. This can lead to very unfair results if the mortgage was paid during the marriage with community earnings or the downpayment was made with community savings. To avoid this result the disadvantaged spouse has to prove that there was a breach of a fiduciary duty and the Court should treat the house as community. If you are ever in this situation you need to immediately consult with an experienced family lawyer. Further, if your credit is bad and your spouse ever tries to convince you that the only way to get a mortgage is to put title in their name you should immediately consult with an attorney.
Another common situation is where one spouse owns a house prior to marriage. During the marriage the title remains in that spouse’s name but the outstanding mortgage is paid with community earnings. The spouse who is not on title may still have a community property interest by virtue of the mortgage payments made with community earnings. This is commonly referred to as a “Moore-Marsden” interest based on the two cases that establish the formula for calculating the community interest. FN2. When a couple have been married a long time and substantial amounts of community earnings have paid off an existing mortgage, making improvements or the parties have re-financed, this “Moore-Marsden” interest can be substantial.
You may wonder why this situation is so different to the one above where the home is acquired during the marriage in one spouse’s name. The simple answer is that’s what the Courts have decided. If you are ever in this situation you need to immediately consult with an experienced family lawyer.
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