The marital residence is often the most valuable asset of the marriage. Hence, classification for property distribution purposes is very important. Property may be classified as separate, marital, or mixed. In jurisdictions adhering to the ”source of funds” theory, payment of the mortgage with marital funds constitutes a marital ”acquisition” of the property, or what lawyers commonly refer to Moore/Marsden calculation to determine interest in the property. Where the ”inception of title” approach is taken, the characterization of the property is fixed when the property is acquired. However, there are various challenges and arguments based on facts of each case. In Re Marriage of Books and Robinson (2008) husband did not have an interest in the property as a matter of law. Court held husband acquiescence in allowing Wife to take title to the property solely in her name triggered the presumption in Evidence Code 662 that the property was wife’s separate property.
Evidence Code 662 states:
The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof
Court disagreed with prior decisions by relying on a old case In Re Marriage of Lucas (1980). This case states that to overcome the forms of title presumption, the evidence of a contrary agreement or understanding must be “clear and convincing”. The presumption can not be overcome by testimony of an intention not disclosed to the grantee at the time of the execution of the conveyance.
In Re Marriage of Valli (2011) Husband purchased life insurance policy on his life and names wife as owner of the policy. Court of appeal holds that because title to the policy was taken solely in wife’s name during marriage with husband’s consent, the form of title presumption and not the community property presumption applies. This opinion is currently vacated and we hope higher court clarifies both In Re Marriage of Brooks & Robinson and Valli.
Assuming that the rational for above two cases are correct, one can still eliminate or minimize the effect. There are defenses that we can use in arguing your case such as undue influence, the doctrine of waiver, and moore/marsden analysis, if applicable.
Establishing Date of separation is very important with respect to property received/acquired after separation or before separation. Parties are considered separated on and after the date on which either makes an emotional break with the other and does not thereafter resume the marital relationship. The critical inquiry is: Whether the parties conduct evidences a complete and final break in the marital relationship.
Separate Property Conflicts
Conflicts often arise between the spouses when the home is acquired by gift, inheritance, or prior to marriage so that it may be considered separate property. In all-property jurisdictions, the court has equitable power to divide property acquired by gift or acquired prior to marriage. Even in dual property jurisdictions, gifts or inherited property might fall within the marital estate. In certain jurisdictions, the home is likely to be included in the marital estate when the court finds hardship because it is such an important asset. However, in California courts, the court considers gifts, inherited property or property acquired prior to marriage or after separation to be separate property with several exceptions.
Divisibility of Separate Property
A major factor that influences divisibility is the contribution of the non-owner spouse to the marriage, and the extent to which that spouse has facilitated the maintenance, improvement and appreciation in the value of the home. The divisibility of separate property is equally influenced by the extent to which marital funds were used for the repayment of any mortgage held on the property. Other influential factors include the length of time after property’s acquisition that the marriage continued and whether the parties became accustomed to a lifestyle dependent upon the property.
Experts using standard appraisal techniques usually perform a valuation of the home. It is preferable to value the home as close as possible to the time of distribution. To ascertain the value of the property for purposes of distribution, all expenses associated with the sale of the property should be included. The risk of any defective title also can be an appropriate factor to take into account when determining valuation of real property, as well as anticipated or potential tax consequences.
Division by Sale
Sale of the marital home is often disadvantageous to at least one of the spouses and is usually disruptive to the children of the marriage. Common reasons for not selling at the time of dissolution include poor market conditions, tax consequences, and the fact that the residence is suitable for the parties’ minor children.
The sale of a marital home may be ordered and the proceeds divided between the parties when a couple’s equity in the home is large, and the property cannot be partitioned or physically divided. It may be the preferred method of distribution when a childless couple dissolves their marriage because division of the proceeds, after the home is sold, is relatively uncomplicated.
Award to One Party
At times, the determinative factor allowing for division is the economic need of one spouse. Statutes often list the desirability of awarding the family home, or the right to dwell in the home for reasonable periods of time, to the custodial parent as a factor for courts to consider in making an equitable distribution. Strong personal ties to the residence may also be a factor in justifying an award to one of the parties. However, the partnership nature of a long-term marriage or economic need may outweigh those personal ties.
Award of the home to one spouse avoids expenses associated with a sale and the necessity of finding new housing for that spouse. Therefore, a distribution has special appeal if there is property to award the other spouse as compensation. Various methods of offset and justifications for unequal division are utilized to avoid sale and allow the home to be awarded to the spouse with meager assets.
Use and Occupancy
There is a strong policy in favor of awarding the use and occupancy of the marital residence to the parent with primary custody when there are minor children of the marriage. This enables the custodial parent and children to continue living in the home when sale of the home and other assets of the marital estate cannot provide comparable housing.
In many jurisdictions a divorce decree will operate to convert a tenancy by the entirety into a tenancy in common between the parties, thus making the property subject to a partition action. As a result, a mortgagee or some other successor in interest to one party’s rights may become a tenant-in-common with the occupying spouse, unencumbered by any rights of survivorship that the occupying spouse enjoyed when the property was owned during marriage as a tenancy by the entirety. However, if one spouse is awarded a percentage interest in the house other than fifty percent, the creditors or successors in interest of that spouse will be limited to rights in the percentage granted to that spouse in the decree, even if the debt or obligation was incurred prior to dissolution.
A partition action is used to divide the property into individual shares among the owners. A partition action involves the division of real property like a home or farm land. Nevertheless, there are times when a partition action has involved personal property like stocks.