If I Owned the House Before Marriage, Is It Still My Property After Divorce?
Learn what happens to a premarital house during a California divorce
If you owned a house before marriage and you expect a divorce, you will ask this question. The answer is both simple and complex. Owning a house before marriage of course means it is premarital property. It also does mean you should have a separate property interest in it during divorce. However, it is the next set of questions that complicate the issue.
- How much is your separate property interest in the house you owned before marriage?
- By extension of question number one, is there a community property interest in the house you owned for the marriage and, if so, what is the community interest during divorce?
- Did you waive your separate property interest in the house you owned before marriage?
- How do you prove during the divorce your separate property interest in the house you own before marriage?
That is what we are here to discuss so we will get to it.
California's separate property laws apply to a house owned before marriage
First, we look to the law. Family Code 770 states:
"(a) Separate property of a married person includes all of the following:
(1) All property owned by the person before marriage.
(2) All property acquired by the person after marriage by gift, bequest, devise, or descent.
(3) The rents, issues, and profits of the property described in this section.
(b) A married person may, without the consent of the person’s spouse, convey the person’s separate property.”
Therefore, you should have a separate property interest during the divorce in that premarital asset which is your house.
The above assumes the house is really yours. It assumes you were on title to the house prior to the marriage and you had an undisputed ownership interest in the house. If that is a disputed issue, it needs to be resolved before we get to the next set of questions.
How much is your separate property interest in the house you owned before the marriage?
First, we look at the value of the house as of the date of marriage. For example, if the marriage was on June 1, 2000, we need a historical appraisal done to determine the value of the house as of June 1, 2000.
Once we have the value, we look at what the equity in the house was as of June 1.
Let us assume for our hypothetical, the house as of the date of marriage on June 1 was worth $1 million and the mortgage on the house was $500,000. That means the house as of the date of marriage had an equity value of $500,000. Let us now assume the house today is worth $1.2 million dollars.
To keep it simple, the separate property interest during divorce in that house that you owned prior to the marriage is, at a minimum, $500,000 (and possibly more) because that is the equity as of the date of marriage. This hypothetical assumes several things.
- You did not refinance the premarital home during the marriage.
- You did not put any separate property money into the house during marriage or after separation, and that includes mortgage payments, improvements, etc.
- You did not "transmute" your separate property interest into community property. What is that? We cover that later.
- Marital earnings (marital money earned during the marriage) or marital savings (which are part of the marital assets acquired during the marriage) paid down the mortgage principal during marriage and after separation.
Does your spouse have a community property interest in the house you owned before the marriage and, if so, what is it?
Take the same hypothetical as above and add the following to it.
- During marriage, marital earnings (earnings acquired during the marriage) or marital savings paid down the principal on the mortgage.
- One of you files for divorce and, during marriage, you and your spouse paid down the mortgage by $100,000, which means the mortgage owed on the house is now $400,000.
- We will also assume the house increased in value by $200,000, which means it is now worth $1.2 million.
The community therefore acquired what the law calls a “pro tanto” interest in the house. Do you love the legal jargon? Not to worry because you do not have to remember that.
Two cases came down in California and they created a rule we call Moore-Marsden. We wrote an extensive article on what this rule means and how you divide the community interest in the house in such a hypothetical. We use different numbers in that article. We highly encourage you to read it. We link it below.
This scenario does apply to many husbands and wives. However, it gets complex if you start adding any of the following:
- Improvements to the house through community or separate property funds,
- Title transfers,
- Anything that complicates the money going into the house or coming out of it, or
- Anything that complicates the ownership interest in the house.
The community property interest may change. It may go up or it may go down.
Did you waive your separate property interest in the house you owned before marriage?
We talked about the value of the house on the date of marriage. We also discussed how the person who owned the house prior to the marriage should receive that equity value as his or her separate property during the divorce.
This is a Family Code 2640 claim. We link for you below an article we wrote about this exact subject.
For the purposes of this section, you should know it is difficult to waive the Family Code 2640 claim. California law, as of the date we write this article, requires a transmutation or a written waiver for there to be a waiver of the 2640 claim. It is rare for spouses to reach such a specific agreement unless they did so deliberately and with the knowledge of what they were doing.
What about the hypothetical where we wrote about a Moore-Marsden claim?
Is the community interest limited to the Moore-Marsden claim if, during the marriage, the spouse who owned the house before marriage placed his or her spouse on title during the marriage?
That title may be through a deed. That deed may be a grant deed or an “interspousal” transfer deed. It may also be a “quitclaim” deed. That title transfer may be a transfer to joint tenancy, a tenancy in common, or a form of community property tenancy. There are variations of each.
California family law is constantly evolving regarding this issue. The subject of deed transfers during the marriage is so common and has occurred for so long in California there are a significant number of cases in our Appellate and Supreme Courts.
Rather than go through the complex layers of California family law, I will give you a short list of the issues the court will review. This is not a list of every issue because the facts control the issues.
What is the language used in the deed?
Does it show an intent to make separate property into community property? If so, this is what we sometimes call a transmutation. Here is what Family Code 852 states.
“(a) A transmutation of real or personal property is not valid unless made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected.
(b) A transmutation of real property is not effective as to third parties without notice thereof unless recorded.
(c) This section does not apply to a gift between the spouses of clothing, wearing apparel, jewelry, or other tangible articles of a personal nature that is used solely or principally by the spouse to whom the gift is made and that is not substantial in value taking into account the circumstances of the marriage.
(d) Nothing in this section affects the law governing characterization of property in which separate property and community property are commingled or otherwise combined.
(e) This section does not apply to or affect a transmutation of property made before January 1, 1985, and the law that would otherwise be applicable to that transmutation shall continue to apply.”
However, do not confuse this with a transmutation of that Family Code 2640 claim. We are not aware of any decision the states a transfer of title during the marriage automatically wipes out a Family Code 2640 claim. There are decisions that state a deed may cause the house to become community property from the date of the title transfer, forward, such that any equity increase after that date becomes community property. There are also decisions that state a deed is not enough to do that.
I wish I could tell you these issues are black or white but the reality is every case is going to be different. That is why there is so much dispute over issues like this.
What was the benefit to the transferring spouse for transferring title to the other spouse?
If the transfer of title occurred because of a refinancing and the homeowner spouse is now also obligated to pay the loan because the refinance added him or her to the mortgage, it may be proper "consideration" for the transfer. After all, both spouses are now liable to the bank for the payment of the mortgage.
What happens if there is no refinancing and the homeowner spouse who owned the house before marriage received nothing in exchange for the deed? That is a common scenario and the question it raises is whether the transferring spouse was under undue influence and can avoid the transmutation result. These issues again get complicated and spouses and their lawyers must delve into whether such undue influence existed and whether the deed was a proper transmutation.
If there is one thing I hope the above shows you is that these issues can get complex, you should not handle them on your own and you should seek the advice of an experienced and knowledgeable family law attorney.
How do you prove your separate property claim during divorce to the house you owned before marriage?
First, you need an appraiser. To determine the value of a house and its equity as of the date of the marriage, you need a historical appraisal and documentation that shows the mortgage and other encumbrances, if any, owed on the house.
If you placed additional separate property funds during the marriage into the house you owned before marriage, get those documents. You will need to trace those funds into the house.
If there was in fact a deed that transferred title during the marriage, you will need a properly recorded copy of it. If there were multiple deeds, you will need a copy of each one.
If there were other transmutation agreements or documents that one spouse claims is a transmutation, you will need to inspect and analyze those documents.
If there was refinancing during the marriage, you may need those refinancing documents. Escrow companies and banks keep these records for a limited time. Therefore, subpoenaing them early is sometimes important (although not always for you since you are not the one who wants to prove a community property interest). However, if there is a dispute regarding the documents and whether they are what they purport to be, the subpoena may resolve that issue.
If the math gets complicated and especially if refinancing took place and/or you need to conduct a tracing of separate property and community property money that went into the house, you will likely need a forensic accountant to help with that work.
Preparation becomes important and preparation starts with identifying the issues in front of you. Once you identify the simplicity or the complexity of what you need to prove, you and your attorney can then make a list of the information you need to prove it. From there, you gather the documentation you need both before litigation and during the litigation process through formal discovery procedures.
Do you need to discuss your separate property claims to your premarital home?
We have the experience and knowledge to help spouses with complex real property issues during their divorce. Contact us for an affordable strategy session.