In divorce, the marital home is often the biggest asset the couple owns. If the home was purchased during the marriage with marital funds, the equity in the home will be considered 100% marital and therefore split 50/50 in CA.
Complications arise if the home was owned by one spouse prior to the marriage, or if payments were made from non-marital funds (i.e. funds acquired prior to marriage and kept separate, inheritance, etc.).
In this case, a separate property tracing must be done to determine what portion of the home equity is marital and what portion is separate and belonging to each spouse.
In California, the accepted formula for determining marital vs separate property is called Moore/Marsden, but different states have different names for a similar formula depending on which case set precedent in that state.
Separate Property Interests
If one spouse owns the home prior to marriage, their contributions and proportional appreciation will be considered separate property. Payments made to the home during marriage from marital funds will contribute to the marital portion. Appreciation is allocated via the formula and the marital portion is then split 50/50.
If another spouse receives an inheritance or other separate funds and uses those funds to pay down principal on the home, that becomes their own separate interest in the property with proportional appreciation allocated via the formula.
Be careful with the type of account you place inherited/ separate funds so that you do not comingle the funds unintentionally. If the spouse puts those inherited funds into a joint account prior to paying down the mortgage, that would not be a separate interest because those funds were comingled and became marital when they were placed into the joint account.
When spouses refinance a home during the marriage, this is a marital debt which will affect the portion of marital equity in the home.
If you have a home where payments were made from both separate and marital funds, contact a CDFA professional to better understand your home equity.
*I am not an attorney and do not provide legal advice.