ECONOMIC CONTRIBUTION FOR DUMMIES
(SPECIFICALLY, FAMILY AND PROBATE LAWYERS)
ECONOMIC CONTRIBUTION - TITLE ONE, SUBCHAPTER E TEXAS FAMILY CODE

(Continued from What You Need To Know)

EXAMPLES

EXAMPLE ONE:

PURCHASE PRICE OF RESIDENCE: $80K
DOWN PAYMENT: $15K
ORIG MTG BALANCE: $65K
MORTGAGE REDUCTION BEFORE MARRIAGE: $15K
VALUE OF RESIDENCE ON DATE OF MARRIAGE: $100K
MTG BAL ON DOM: $50K
EQUITY IN PROPERTY ON DATE OF MARRIAGE: $50K
MTG REDUCTION DURING MARRIAGE: $30K
VALUE OF RESIDENCE ON DATE OF DIVORCE: $200K
MTG BALANCE ON DATE OF DIVORCE: $20K
NET EQUITY ON DATE OF DIVORCE: $180K

FORMULA FOR EXAMPLE ONE :

30K (COMMUNITY PAYMENTS) / 30K + 50K (EQUITY ON DATE OF MARRIAGE) = 37.5% X 180K (EQUITY ON DATE OF DIVORCE) = $67,500 BROUGHT BACK INTO THE COMMUNITY TO DIVIDE.

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EXAMPLE TWO:

SAME AS ABOVE, BUT PROPERTY HAS NOT APPRECIATED. FMV STILL $100K:
PURCHASE PRICE OF RESIDENCE: $80K
DOWN PAYMENT: $15K
ORIG MTG BALANCE: $65K
MORTGAGE REDUCTION BEFORE MARRIAGE: $15K
VALUE OF RESIDENCE ON DATE OF MARRIAGE: $100K
MTG BAL ON DOM: $50K
EQUITY IN PROPERTY ON DATE OF MARRIAGE: $50K
MTG REDUCTION DURING MARRIAGE: $30K
VALUE OF RESIDENCE ON DATE OF DIVORCE: $100K
MTG BALANCE ON DATE OF DIVORCE: $20K
NET EQUITY ON DATE OF DIVORCE: $80K

FORMULA ON EXAMPLE TWO :

$30K COMMUNITY PAYMENTS) / 30K + 50K (EQUITY ON DATE OF MARRIAGE) = 37.5%, BUT THIS TIME IT IS OF CURRENT EQUITY OF $80K, MEANING $30K BROUGHT BACK INTO THE COMMUNITY TO BE DIVIDED, THE REMAINING $50K EQUITY REMAINS SEPARATE PROPERTY.

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EXAMPLE THREE:

SAME AS ABOVE, BUT PROPERTY VALUE HAS DECLINED SINCE MARRIAGE TO $80K
PURCHASE PRICE OF RESIDENCE: $80K
DOWN PAYMENT: $15K
ORIG MTG BALANCE: $65K
MORTGAGE REDUCTION BEFORE MARRIAGE: $15K
VALUE OF RESIDENCE ON DATE OF MARRIAGE: $100K
MTG BAL ON DOM: $50K
EQUITY IN PROPERTY ON DATE OF MARRIAGE: $50K
MTG REDUCTION DURING MARRIAGE: $30K
VALUE OF RESIDENCE ON DATE OF DIVORCE: $80K
MTG BALANCE ON DATE OF DIVORCE: $20K
NET EQUITY ON DATE OF DIVORCE: $60K

FORMULA ON EXAMPLE THREE :

$30K COMMUNITY PAYMENTS) / 30K + 50K (EQUITY ON DATE OF MARRIAGE) = 37.5%, BUT THIS TIME IT IS OF CURRENT EQUITY OF $60K, MEANING $22,500 BROUGHT BACK INTO THE COMMUNITY TO BE DIVIDED, THE REMAINING $37,500 EQUITY REMAINS SEPARATE PROPERTY.
THIS RESULTS IN A NET LOSS TO THE COMMUNITY COMPARED WITH ITS CONTRIBUTION.

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EXAMPLE FOUR:

SAME AS ABOVE, EXCEPT RESIDENCE PAID FOR WHEN MARRIED, AND THEREAFTER SEPARATE PROPERTY INHERITANCE IMPROVES PROPERTY WITH A $50K SWIMMING POOL. WHEN IMPROVEMENTS BEGIN, PROPERTY IS WORTH $140K.
PURCHASE PRICE OF RESIDENCE: $N/A
VALUE OF RESIDENCE ON DATE OF MARRIAGE: N/A
EQUITY ON DATE OF IMPROVEMENTS: $140,000
COST OF IMPROVEMENTS: $50,000
VALUE OF RESIDENCE ON DATE OF DIVORCE: $250K
NET ENHANCEMENT IN VALUE: $60,000.

FORMULA FOR EXAMPLE FOUR:

50K (COST OF IMPROVEMENTS) / THE SUM OF $50K PLUS $140K (EQUITY ON DATE OF IMPROVEMENTS) = 26.3% X $250K (EQUITY ON DATE OF DIVORCE) = $65,789 REIMBURSEMENT TO THE SEPARATE PROPERTY ESTATE OF THE PARTY WHO PAID FOR THE SWIMMING POOL

Economic Contribution for Dummies Continued (Suggested Language for Pleadings)