Characterization and Allocation of Equity in Real Property

California Family Law courts may confirm the increase in the equity in real property during the marriage to one party, award it to the community or allocate it between the community and the separate property of a party based on a number of factors:

  • title
  • date of acquisition
  • source of funds used for acquisition, improvements, and/or principal payments on a loan
  • amount of increase in value
  • refinancing

 

family Law Infographic - Allocation of Equity in Real Property

California family law courts allocate the increase in equity in real property during the marriage to the community and/or the separate property of the parties based on a number of factors:

  • title
  • date of acquisition
  • source of funds used for acquisition, improvements, and/or principal payments on a loan
  • increase in value
  • refinancing

Community Acquires an Interest in a House Owned by One Spouse

California family law dictates that the community may acquire an interest in real property if community funds are used to improve or make principal payments on a mortgage secured by a residence owned solely by one spouse. (Moore/Marsden)

Community Money Used For Separate House

 

Title Changed

The amount of equity that exists on the date the owner-spouse places the other spouse’s name on title to his/her separate real property will generally remain his/her separate property (without any appreciation or interest) unless a specific waiver is made, in writing, of his/her right to reimbursement. (Family Code Section 2640)

Family Law Infographic - Community Acquires an Interest in a House Owned by One Spouse

Separate Money Used Re: Joint House

If a party uses his/her separate funds to acquire real property in joint names, or pay down the loan on jointly owned real property, he/she may be reimbursed if that party can trace the separate funds back to a separate property account. Reimbursement of separate funds used to improve real property in joint names is limited to the increase in value resulting from the contribution.

 

Refinance

If an asset is purchased with funds obtained through the refinance of a jointly owned house that was originally the separate property of one spouse, upon divorce that spouse may be reimbursed the equity that existed on the day the house was transmuted into joint names. The spouse who originally owned the first house as separate property may trace his/her equity in the first into the second house. (In Re: Marriage of Walrath)