Understanding Undue Influence: Key Takeaways from the Moore Marsden Series Presentation
In a recent presentation, the Moore Marsden Experts explored the complex issue of undue influence in family and property law. The session shed light on critical legal principles, real-world scenarios, and potential remedies. This article summarizes the key insights for those who missed the event.
What Is Undue Influence?
Undue influence arises when one spouse takes unfair advantage of the other in transactions involving marital property. Family Code Section 721 establishes that spouses owe each other a fiduciary duty—the highest standard of good faith and fair dealing. If one spouse secures an advantage in a transaction, a legal presumption of undue influence arises, potentially invalidating the transaction. This principle was affirmed in several landmark cases, including In re Marriage of Mathews (2005) and In re Marriage of Lund (2009).
When Is a Moore Marsden Calculation Needed?
A Moore Marsden Calculation determines the separate and community property interests in scenarios where:
A property was purchased before marriage but the community made mortgage payments during the marriage.
A marital dissolution or probate requires clarification of property interests.
The calculation accounts for:
Separate principal and appreciation before marriage.
Community contributions and appreciation attributable to those contributions during the marriage.
Common Scenarios of Undue Influence
Undue influence often arises in the following contexts:
One spouse signing a grant or interspousal deed to classify property as separate property.
Community funds used to pay mortgages or loans on separate property.
Interest-only payments on separate property purchased during the marriage.
Situations involving co-owners or co-borrowers, such as parents.
Potential Remedies
When undue influence is suspected, courts may:
Set aside grant or interspousal deeds.
Reimburse the community for mortgage payments made on separate property.
Reclassify separate property as community property if it was purchased during the marriage using community funds.
Substitute conventional mortgage calculations to include principal payments where only interest payments were made.
Burden of Proof in Overcoming Presumptions
The advantaged spouse must rebut the presumption of undue influence by demonstrating that the disadvantaged spouse acted:
Freely and voluntarily.
With full knowledge of the facts.
With a complete understanding of the transaction’s effects.
Failure to meet this burden may result in the court setting aside the transaction.
Current Issues: Epstein Credits and Watts Charges
The presentation also highlighted financial considerations post-separation:
Epstein Credits: Reimbursement for mortgage and maintenance expenses paid by one spouse after separation.
Watts Charges: Fair market rental value charged to the spouse occupying a property post-separation. Given rising rents, these charges can be significant.
Attorneys should advise clients early about these potential liabilities to ensure informed decision-making.
The Role of Experts in Resolving Undue Influence Issues
CPAs and real estate experts play a crucial role in preparing Moore Marsden Calculations and providing objective analyses. Experts may offer alternative calculations based on possible legal outcomes, but the final determination lies with the court.
Conclusion
Understanding undue influence is essential for navigating complex property disputes in family law. By recognizing the scenarios where it may arise and implementing appropriate remedies, legal professionals can protect their clients’ interests. For personalized assistance or further details, feel free to reach out to the Moore Marsden Experts.
