All property division pursuant to a divorce in Washington state starts from the simple premise that all assets accumulated during the marriage will be presumed to be “community property” and split 50/50. But in practice the 50/50 split often does not end up being the result because of such legally cognizable factors as: the earning power of the parties upon termination of the marriage is highly unequal, one party made the entire down-payment, the property came by inheritance, and quite a few others. Often time this arises in shorter marriages where the parties have acquired a piece of real-estate. So how does one answer this question?

The mortgage rule is a legal tool used to characterize property acquired, using both community and separate funds, over a period of time. Harry M. Cross, The Community Property Law in Washington, 61 WASH. L. REV. 13, 39-49 (rev. 1985). The mortgage rule examines whether both parties concerned were obligated to make payments in order to retain ownership of the disputed asset. If there was no such continuing obligation, then the character of the asset is retrospectively determined to be proportionate to the ratio of separate and/or community funds used to acquire the asset. Absent a continuing obligation, the character of the property is retrospectively determined to be proportionate to the ratio of separate and or community funds used to acquire the property It is precisely this mortgage indebtedness that itself constitutes a contribution to effect the final determination of what proportionate share either party should be entitled to. If the other spouse signs the promissory note they become liable to the bank and later third parties for repayment. Even if that party had low income and no assets to secure the loan it is still a contribution. If separate funds are used to make a contribution and are traceable a lien for the down-payment amount could be found but only to that extent of that separate contribution to the down payment. However, In Re Hurd changes this slightly in that the separate character of a cash down payment can be transformed into community property by titling the home in both parties names.

Tags: Property Division, Real-Estate, Washington Divorce Law

This entry was posted on October 7, 2008 at 2:54 am and is filed under Property Law. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.