Dividing Real Estate in Community Property States

In general, if the Real Estate is owned by the community, the community divides the Fair Market Value of the Real Estate at the time of division of the asset (transfer of funds).

The Real Estate may be sold, and the net proceeds divided.

The Real Estate can also be transferred from one spouse to the other with an equalization payment.

Real Estate owned prior to Marriage

The Separate Property of any Real Estate owned prior to marriage is identified (Traced) and a claim of reimbursement (Section 2640) is made for the separate property.

Moore Marsden Calculations

The community is entitled to a portion of the real estate owned prior to marriage as a result of the mortgage payments made during the marriage to the extent that the mortgage payments were made with community property funds. Had the mortgage payments and the principal reduction been made with separate property funds, the community would likely not have obtained any interest in the home through the Moore Marsden formula. Furthermore, if the principal had not been reduced and the mortgage payments made during the marriage were interest-only, regardless of whether the community or the separate property paid for it, there likely would not have been any interest to the community for the mortgage payments unless there was some other theory of reimbursement that could be made, such as, improvements to the home.

To conduct the Moore Marsden analysis take the market value of the home at the time of marriage and, the value of the home today.  Take purchase price of the home, divide by principal payments during marriage.  This is the community property interest in the home percentage.  Multiply this percentage by the appreciation during the marriage to obtain the community property appreciation.  Add % appreciation gained by community to the principal payments paid during marriage to get the Community portion of the property.  Divide by ½ to get the other spouse’s portion of the community property.

Buying a House Together

You are Engaged to be married and may wish to purchase a property prior to marriage.


This is actually a good idea . . to purchase prior to marriage, and here is how I would consider structuring the deal.


Structure a Contract as a Business Proposition – Consider an LLC to own the house with each person as %owner-members of the LLC.   This may have negative tax consequences upon sale as LLCs aren’t eligible for a homeowner’s Capital Gain Exclusion (if that tax break even exists when the house is sold).




Basically, treat this transaction as the business deal that it truly is. 

The more you can take the EMOTION out of financial decisions, the healthier it is for the people and their relationships.