In California, a community property state, the spouses are the “community” and all that accrues to the community is held equally. Upon dissolution of marriage, all that was held by the community is split 50/50 – theoretically, at least.
To achieve that 50/50 split, everything on both sides of the ledger, has to be correctly assessed and tallied up.
However, when it comes to real property valuations, the process can become complex. It’s here that the Moore Marsden calculation comes into play.
The Moore Marsden rule
The names “Moore” and “Marsden” come from marital dissolution cases decided in 1980 and 1982 in which the question of community interest in a property is hammered out. Some courts refer to the community interest as the Moore Marsden interest.
When community funds are used to pay down the principal on a property that was owned by one of the spouses prior to marriage, the community acquires a Moore Marsden interest in that property. Upon dissolution of the marriage, that community interest is valuated using a calculation known as the Moore Marsden rule.
The outcome of that calculation goes onto the proverbial ledger of marital assets and debts, so that the targeted 50/50 split of property can be accurately arrived at.
As a side note, the Moore Marsden rule is only used in community property states.
Moore Marsden mistakes
Finding the numbers to plug into the Moore Marsden formula is no small exercise. It’s here that matters can go awry.
The fair market value (FMV) of a property at date of separation will be needed, but FMVs at retrospective appraisal dates such as the date of marriage and the date the spouse was added to the title are also needed, and the changes in these valuations are frequently underestimated.
The problem is that seeking the professional services of a forensic accountant, real estate appraiser or attorney for the valuations can be very costly. The trade-off, though, going with a Zillow estimate or a comparative market analysis done by a real estate agent, may yield less than reliable results.
Ultimately, the goal is to do property division negotiations with a sense of fairness and cooperation. Executing on that can be a challenge.