California Family Law Attorney
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June 14, 2010
  Is a PRENUPTIAL AGREEMENT signed without an attorney ENFORCEABLE?
Posted By Thurman Arnold

Q. Before my wife and I married, she convinced me to sign a Prenup prepared by her brother, who is a Los Angeles divorce attorney. It says that I waive any right to property acquired with her earnings. It also says I had the opportunity to get legal advice but was choosing not to. At the time I couldn't afford an attorney. Six years later, she says I have no rights to the house we bought together. A friend says that since I didn't have an attorney at the time I signed it, the agreement cannot be enforced. Is this true?

Rick, Pasadena, CA


Must an Attorney Advise Me Before I Sign a Premarital Agreement?

Whether or not a Prenup - formally known as a premarital agreement - gets enforced is highly fact specific, so it is impossible for me to answer your question except in general terms. I would need more information and to look at the document carefully. I can give you some useful pointers, however.

California has adopted the UPAA (The Uniform Premarital Act) as Family Code sections 1600-1617. Prior to its adoption prenups were viewed by courts with suspicion, and they were much harder to enforce. One reason was that as a matter of public policy it was believed that prenuptial agreements undermined marriage and so promoted divorce. Today they are viewed as supportive of the marriage institution, particularly in cases of second marriages where many people won't remarry without one. Although we speak in terms of marriage, the UPAA applies equally to registered domestic partnerships.

Still, they are viewed somewhat technically and to be enforceable they must meet the requirements of the statutes. Family Code section 1612 speaks to what rights are properly altered by a Prenup. Subsection (a)(1) and (3) deal with property interests. As a starting point, there is no question but that a premarital agreement can waive interests in real property like residences.

The critical family code section dealing with enforceability is section 1615. Anybody considering a Prenup, or questioning its validity, should scan this statute. The chief defense to a Prenup is that it was not executed voluntarily. If you can prove that, it will be treated as void. If the agreement was signed as result of duress, coercion or undue influence it will likely not be enforced. The lack of an independent attorney can result in a finding that the agreement was not entered voluntarily.

If one expects a premarital agreement to be enforceable, there is simply is no safe reason for dispensing with legal counsel. Prenups should only and always be drafted by qualified attorneys, and both parties must actually be advised about their legal effect, or they may not be worth the paper they are written on.

In all cases where my office drafts a premarital agreement, we will not proceed if the other party is unrepresented. In fact, where the other party lacks sufficient financial resources to do so, we insist that person select counsel and that our client pay for it. In my opinion it is a dangerous practice to deny a less financially empowered spouse or domestic partner the ability to access legal counsel in these situations.

Why Is Independent Counsel Important?

The importance of having independent counsel in these matters is evident from the language of FC section 1615:

"(a) A premarital agreement is not enforceable if the party against whom enforcement is sought proves either of the following:
* * *
(c) For the purposes of subdivision (a), it shall be deemed that a premarital agreement was not executed voluntarily unless the court finds in writing or on the record all of the following:

(1) The party against whom enforcement is sought was represented by independent legal counsel at the time of signing the agreement or, after being advised to seek independent legal counsel, expressly waived, in a separate writing, representation by independent legal counsel.

(2) The party against whom enforcement is sought had not less than seven calendar days between the time that party was first presented with the agreement and advised to seek independent legal counsel and the time the agreement was signed.

(3) The party against whom enforcement is sought, if unrepresented by legal counsel, was fully informed of the terms and basic effect of the agreement as well as the rights and obligations he or she was giving up by signing the agreement, and was proficient in the language in which the explanation of the party's rights was conducted and in which the agreement was written. The explanation of the rights and obligations relinquished shall be memorialized in writing and delivered to the party prior to signing the agreement. The unrepresented party shall, on or before the signing of the premarital agreement, execute a document declaring that he or she received the information required by this paragraph and indicating who provided that information...."

Notice how these provisions are almost shouting 'independent legal counsel.' It is rare to see a phrase repeated so often within the same code section.

So examine whether your agreement, and the required separate writing, seem to address these requirements. Also, check to see whether the other conditions for enforceability are met. There may be other reasons why your Prenup will not be enforced, as where undue influence was exerted to obtain your signature (notice the seven day waiting period, which is intended to overcome the social pressures where a wedding date is looming). But you would be ill-advised to embark upon a challenge to the agreement without legal counsel this time around; don't compound the problem.

A final comment: Setting aside the prenuptial agreement may only have a limited affect upon the status of the house. For instance, the rules relating to transmutations and reimbursements still apply. I have written about those elsewhere in this Blog, but if the house was acquired by your wife as her separate property independently of the Prenup it remains her separate property even if the agreement is voided. However, if there was a mortgage and it was paid down with her earnings during marriage the cancellation of the Prenup may benefit you because the community will thereby gain a Moore Marsden reimbursement right in the principal pay down and appreciation.

Again, seek out an experienced family law attorney. And, I always urge that people consider mediating these types of family law disputes, or even mediating the provisions of the prenup prior to signing the final version.

For more articles about premarital agreements, visit us here!

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T.W. Arnold


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June 12, 2010
  Does MOORE MARSDEN appy to IMPROVEMENTS we made to our RESIDENCE during marriage?
Posted By Thurman Arnold

Q. I understand that Moore Marsden has something to do with reimbursing the community estate for the mortgage payments we made on the house my wife owned prior to our marriage, but we spent some the monies we saved during our marriage on improvements to the house. Do I get any of this back?


What Is the Moore Marsden Formula?

The Moore Marsden formula typically deals with what happens to the equity in property owned in the name of one spouse alone - in this case a house - where during marriage community property (i.e., either spouse's earnings) is used to make mortgage payments. Where these mortgage payments are a combination of principal and interest, and not interest only, their net effect is to increase equity by reducing principal. Over many years the amount of principal reduction can be substantial. In effect the spouse who solely owns that residence is benefiting by the community's contribution. This is potentially a kind of breach of fiduciary duty, giving rise to reimbursement rights. Over time this right of reimbursement to the community grows, but it only applies to increases in equity. There is no right to be reimbursed for interest, taxes and insurance payments. I have given an example of how these Moore Marsden interests are calculated here.

What About Transmutations?

Sometimes during marriage after a period of community payments on the separate property mortgage of one spouse, spouses or domestic partners transfer title to the property into joint names (often where there is a refinance and the lender requires it) so that now both spouses are on title to what was previously one spouse's separate property. This is called a transmutation. Under Family Code section 2581 the property is deemed "acquired" during marriage and so the house now presumptively becomes community property. Use our search engine to find more information about transmutations. Later, upon dissolution or legal separation these interests need to be separated out and accounted for. In such cases several levels must be analyzed:

First, a transmutation (adding a spouse to title to what was previously separate property) must be free and voluntary, and there is a presumption that the spouse who comes onto title did so through some form of undue influence. This may or may not at all be true, but it is the burden of the later titled spouse to establish the absence of undue influence. If there was undue influence, then the title change can be set aside and the property remains separate. If the title change is set aside, Moore Marsden applies because the property will be deemed to have always been the separate property of the first spouse but the community will still be entitled to a ratio of equity reimbursements.

If there has been a valid transmutation, then the first spouse is still entitled to be reimbursed for the value of their separate property contribution to the community (absent an express written waiver of this right of reimbursement). This is determined as of the date of the transmutation, and is governed by Family Code section 2640. Moore Marsden may still apply to determining the amount of this 2640 reimbursement. For example, say on the date of marriage Wife owned the property in her name and the mortgage owing is $100,000. Assume at the date Husband is added to title the mortgage has been paid down to $80,000. Also assume the value of the property remains the same at $200,000. Here there has been an increase of $20,000 in equity and the community must be reimbursed. On the date Husband goes on title $100,000 of the equity is Wife's pure separate property - the house was worth $200,000 and the mortgage was then $100,000. Wife is entitled to a 2640 reimbursement of $100,000. However, both H and W have a community interest in that $20,000 of principal reduction. Moore Marsden will be used to determine the value of each of their shares (often there has been a change of value between the two dates - assuming the house appreciated, then they also share in different proportions in the equity increase). Wife's $100,000 2640 reimbursement will be increased by her share of the community increase. If there has been appreciation, a ratio is determined that fixes the amount of community reimbursement due.

What to learn more about 2640 reimbursements?

What to learn more about transmutations?


Only Calculate the Moore Marsden Claim Up to Point of Transmutation

In contrast, if the mortgage had been interest-only up to the date of the transfer (with no capital improvements), then as of the date of this transfer the community would have no Moore Marsden reimbursement and Wife's 2640 claim would be 100% of the home equity on that date.

Once both parties jointly own the property, Moore Marsden will not apply to the increases or contributions that occur thereafter (unless there is a future transmutation back to one party or the other alone) although it may later be used as illustrated above to determine 2640 credits on the date the other spouse goes on the deed. This is because the formula is only used to value reimbursements to the community for mortgage debt payment - once parties are on title, the residence becomes community property subject to a separate property reimbursement instead of separate property subject to a community reimbursement. It still apples to determining the other party's 2640 reimbursement at the time of transmutation.


Moore Marsden and Residence Improvements

A common situation occurs when one spouse holds property in their name alone but the spouses together, or the other spouse, contributes monies to remodels or improvements. If the source of the improvements are the community dime, rather than the owner's SP, the value of those improvements may need to be reimbursed.

However, they are not reimbursed as part of a Moore-Marsden calculation. Moore Marsden reimbursements are limited to issues relating to reduction of debt on real property (mortgages), but also include a share of appreciation, as part of the "acquisition" of that property. Capital improvements are not considered an "acquisition."

Instead, a separate line of cases empowers courts to reimburse the community estate (of which each party owns one-half) for at least the dollar-for-dollar value of the contributions (i.e., installing an irrigation ditch: Marriage of Wolf (2001) 91 Cal.App.4th 962), but possibly for the enhanced value to the property that the improvements create, if that sum is greater than the out of pocket costs (Marriage of Frick (1986) 181 Cal.App.3d 997). Thus, the extent of the reimbursement may turn on whether those improvements actually increased the value of the home. If community funds are used to buy a solid gold toilet, that toilet may have little impact on the value of the home per se (the toilet is still worth whatever it is worth). Many improvements (or repairs) don't increase value. Another example might be an improvement that loses value over time, like new carpeting. This is to be compared with adding more square footage by enlarging the house. Expert testimony may be required to prove the improvements increased value and to what extent.

What happens when one spouse's SP is used to make some form of payment on the other spouse's SP, whether for mortgage reduction or improvements? It may well be treated as a gift. Marriage of Camire (1980) 105 Cal.App.3d 859.

And, what happens where the CP improvements for which a reimbursement right does exists were made prior to a transmutation, i.e., before the other spouse comes to be added to title? In those situations, the party who owned the separate property is entitled to a Family Code section 2640 credit for their equity in the property on the date the other becomes a joint owner. That will require a Moore Marsden calculation as of the transmutation date, but it won't take the CP improvements into account. Whether these get reimbursed at all would seem to depend on whether the property has continued to increase in value after becoming joint. It will be within that increase that the prior-to-transmutation improvements get reimbursed. If there is no increase, or even a decrease, then the community ultimately made a bad investment. Remember, these types of reimbursements only come from the asset itself, and not from some other unrelated property or asset.

Complicated? You bet. There are so many possible scenarios and it is hard to speak to these concepts except in generalities. Often a forensic accountant with Moore Marsden experience will need to be engaged. Since the fair market value of property may need to be determined at various points of time (for instance, the date of marriage, the date the new spouse comes on title, and the date of division), expert opinions of value of the real estate may also be required. It may be problematic to value property as of some long ago date.

My hope is here is to introduce you to the concepts so that you may be somewhat conversant with them. Find an experienced family lawyer to assist you! They will know local experts who can help with the analysis.

Here is a link to more articles discussing Moore-Marsden claims!

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Author: Thurman Arnold
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April 07, 2010
  When can I file for LEGAL SEPARATION in CALIFORNIA?
Posted By Thurman Arnold

Q. Can I file for legal separation in California if I just moved here from Arizona?


In order to be entitled to file an action for legal separation, a spouse does not need to be a resident of the State of California when they file; this is not true for divorce. To be legally entitled to file a dissolution proceeding here, you must either already be a California resident temporarily living elsewhere, or you must have been physically present in this state for at least six months.

For example, assuming Mrs. Smith from Idaho moved to California two months ago and now wishes to dissolve the marriage in this State, she has not yet met the California residency requirements for divorce and if she files an action for dissolution it will be denied - especially if Mr. Smith objects that she is not a resident of this State. But perhaps Mrs. Smith is in immediate need of spousal support - she is fleeing domestic violence by Mr. Smith who is a raging alcoholic - in that case, even though she is not domiciled here and has not been here for at least six months, she can file an action for legal separation and obtain temporary support orders and possibly attorney fees against Mr. Smith, so long as there is a basis for California to assume jurisdiction over Mr. Smith once he is served.

After the time has passed (6 months) for Mrs. Smith to establish her residency here, she is entitled to amend to the Petition to now seek a divorce. In the meantime, she has been protected. (While a California Court can always dissolve a marriage, in order for property or financial orders to be valid as against Mr. Smith, California must have jurisdiction over him by way of his presence here at least at time of service, his consent to jurisdiction, or other legally sufficient contacts with this state).

Please note, however, that Legal Separations can only be granted by mutual consent, or where the other party fails to respond in the action and so the Judgment is entered by default. Also, divorces filed in other states trump legal separations filed in California for purposes of forcing you back there to litigate if you spouse wishes to go that route.

For more information about legal separations, please click here.

Thurman Arnold III
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January 07, 2010
  My wife she used her INHERITANCE to buy our home. We are getting divorced.
Posted By Thurman Arnold, III

Q. My wife and I separated in June 2009. When we purchased our home in March of 1998 (married December 1994), she used part of an inheritance from her grandmother to help with the down payment. I have been paying the mortgage since we bought it. Will she get her inheritance back in our divorce? What would I get?

Howard, Seal Beach, CA


Because I need more information and the answer to some questions and then to follow up questions, I can only give you a generalized response.

Family Code Section 2640

So long as your wife can trace the portion of her downpayment contribution to the inheritance, she is entitled to a Family Code section 2640 reimbursement in the amount that she proves by this tracing. However, she has the burden of proof and problems arise for her if the monies were commingled into a joint account. Does she have the necessary records? If this is a lengthy marriage, I'd bet not.

She is not entitled to interest on grandma's gift to her, however, but only the principal. However, this assumes that the downpayment contribution always remained separate from any other money or bank assets that you had an interest in, or that the community had an interest in: If the inheritance monies were commingled with joint monies or your separate funds between the date she received them and the date they were used as part of the purchase price for the home, then a further tracing is required to establish that what money in the account at that time was her separate and what amount was something else. Here is a Blog article that discusses tracing principles in more detail.

You don't report whether you were on title to the residence when escrow closed or at any later time. Whether or not you were on title when the property was purchased, it is presumed to be community property UNLESS you (a) deeded off when escrow closed or deeded off since that time or (b) consented to or are deemed to have consented to your Wife being the sole record title holder if at the close of escrow title issued in her name.

If you were on title at close of escrow and to the present day, the answer is easy - your Wife gets her traced inheritance money first, off the top, from any equity in the home. She does not get interest on the money. The remaining net equity, without other facts, belongs to the community so that each of you is entitled to one-half of what remains.

If you were not on title when escrow closed, and if you cannot rebut by clear and convincing evidence the legal presumption set forth in Evidence Code section 662 (based upon form of taking title in her name alone) that you consented to that outcome, then (a) your Wife still gets her downpayment back and (b) the community estate is entitled to be reimbursed for carrying the mortgage all those years and reducing the principal balance due the mortgage holder. It doesn't matter who paid the mortgage, so long as it was paid from community earnings during the marriage.


Moore-Marsden Apportionments

There is a very important reimbursement concept under California Law known as Moore-Marsden apportionment. It applies to a common situation where a home is acquired before marriage (or during marriage as separate property), title is in the name of the acquiring spouse alone, and during the marriage and up to separation or divorce and there is or was a mortgage that was paid during the marriage.

Where this occurs the community estate acquires a legal, reimbursable, interest in what would be otherwise be entirely the separate property of the titled spouse IF community funds (earnings of either spouse, for instance, or both) are used to make the mortgage payments. The idea is that joint funds are being used to benefit a separate property interest, i.e., the separate property equity. Many legal scholars consider this to be a breach of fiduciary duty - that whenever one or the other spouse's separate property interests are increased with community funds, or community time, skill, and efforts of either spouse during the marriage, the community is disadvantaged and that this disadvantage violates the statutory duties of the parties that place the party's joint interests above their separate interests.

The formula for apportionment is that the community acquires a pro tanto (dollar for dollar) interest in the ratio that principal payments on the purchase price made with community property bear to payments made with separate property. Hence, any increase in value (appreciation) must be apportioned accordingly between the separate property and the community property estates upon separation or dissolution.

Note that this only applies to separate property owned prior to marriage with a mortgage that was paid during marriage where an equity position has been increased. For instance, if a mortgage exists but it is an interest only, payments during marriage do not reduce principal. Therefore, the separate interest of the owner spouse is not improved because the debt remains exactly the same. As a general rule, the amounts paid for interest, taxes, and insurance on the house are disregarded since that portion does not to contribute to the capital investment.

Also, it assumes that the mortgage was paid with joint (community) funds, or that the funds used were so commingled that the "separatizer" is unable to trace them to a separate property source (meaning they don't have records showing where each payment was made or are unable to provide a recapitalization of the source of the funds). If your husband reduced the mortgage throughout the marriage but he did it with an account that was his separate property then the community would not have this reimbursement right.

The Moore Marsden formula requires a number of bits of information at important points in time to be properly calculated. These include: a) what was the original purchase price; b) what was the original mortgage and downpayment; c) what was the property worth at the date of marriage (DOM); d) what was owed to the lender at that time; e) what was the property worth at the date of separation; f) what was owed at that time; g) what is the property worth on the date of the calculation (i.e., the trial date); h) and what is the principal pay-off at that time?

This is a good example of why family law and divorce cases can become quite expensive. Obtaining these records, particularly if you are the 'out spouse' can be difficult, and sometimes a forensic accountant is the best option for calculating these apportionments. Find a local CPA with family law experience to help you trace the funds. You need an experienced family law attorney for these types of matters as well.

In your case, with a lengthy marriage and little owing, you have significant Moore Marsden entitlements.

Author: T.W. Arnold, III, CFLS


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August 20, 2009
  Can you give me a MOORE MARSDEN Analysis on My SEPARATE PROPERTY HOME?
Posted By Thurman Arnold

Q. Can you please help. I understand a Moore-Marsden analysis needs to be performed on my house in my pending divorce, but I don't understand what it is my attorney is telling me.

These are the facts. On 1/1/02 I put my wife on the title to the property. This is what happened.

Purchase price 6/92 before marriage

$164,875

Date of Marriage 5/15/94 Market value

$190,000

Market Value 1/1/2002 when Wife goes on Title

$245,000

Market value 4/7/2008

$612,000

Initial 6/92 Down payment

$54,875

Principal Payment from separate prop. after separation

$6,836

FMV today (decreased since DOS) $500,000


Frederic, in San Dimas


Sample Moore Marsden Analysis

Here is an illustration of how the calculation works. You are attempting to determine two things: a) the amount of principal reduction on the real estate during marriage, and assuming the property is titled in only one spouse's name (or as of the date of transmutation, where both spouses go on title down the road, if applicable); and b) the percentage share by the community in the appreciation, if any, during the period in question.

Please see my FAQ on Moore Marsden generally. As you can see, it is complicated. You will need a forensic accountant and you may want a real estate expert because fair market values need to be fixed at various dates. Your situation is even more complicated because you placed her on title. The simplest Moore-Marsden ("M-M") situation deals with a property owned in the name of one spouse throughout the marriage, where marital earnings are used to pay the mortgage down - the fundamental concept is that the community should get some reimbursement for this, which comes back as a share in the appreciation and reduced principal obligation.

You will need to get:

  • the mortgage payoff balances on the date of marriage;
  • the mortgage payoff balance on date of the transmutation (when your wife went on title)
  • the payoff balance at date of separation
  • and you will need a mortgage balance near the date of your trial

I want to mention that all transmutations that favor one spouse and disadvantage the other, like putting her on the deed on 1/1/02, are subject to a claim that they should be set aside. This is because there is a presumption that your Wife exerted undue influence upon you - please research my fiduciary duty blog articles using the on-site search engine if this interests you.

Therefore, one scenario is:

Assuming $ 54,875 dowppayment
and $6,836 (paydown before M)
(you will need the mortgage statements) $25,125 appreciation before M
and ($20,197) principal reduction during M

then: $54,875 [DP] PLUS $89,803
[SP Loan of $110,000 minus $20,197 CP payments]
= $144,678 DIVIDED BY $164,875 [purchase price]
= 's a 87.75 SP Interest

and

$20,197 divided by $164,875 =' a 12.25% CP interest



NEXT $ 54,875 [DP]
$6,836
(plus post DOS loan payments which I don't
see broken out so assume zero here) 61,711 PLUS 25,125 (premarital appreciation) PLUS 315,900 [87.75% of post-DOM appreciation to present assuming FMV $550,000 today equals $550,000 less $164,875 less $25,125 = "$360,000]" - appreciation percentage of H's SP interest = $402,736 (H's SP share)

COMMUNITY INTEREST IS: $20,197 plus 12.25% of 360,000 = $44,100"
plus $20,197 = "$64,297"
Wife' hare is this number divided by 2 = $32,148 equalization to W

I recognize that this may seem imcomprehensible. I will endeavor to write some simpler blogs on this topic, because this is a very common area for questions. Yikes!

Author: Thurman W. Arnold



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