Marital Home
Summary in Divorce

For most couples the place they called home can be emblematic of the marriage, and here a note of caution is in order. In the emotional tsunami of divorce, couples often act out melodramas of vindication that makes the house the symbol of the home, which now moves into the realm of a bittersweet memory of what was but is no more. The disposition of the family home can be charged with emotion, particularly for the wife who made the home a nest where she raised the children.

The decision to keep a home requires thinking long term and short term. Courts are very inclined to award the house to the wife so that school-age children experience the least disruption, particularly in states where judges have discretion in the equitable distribution of property. This means that the equitable distribution of property may result in the marital home going to a mother. In a divorce, the person awarded the marital home should be certain that he or she can afford to keep it. Many times, women who keep the marital home find themselves house poor.

Sale is often the only option if both parties are to receive an equitable share in the distribution of joint assets. In general, therefore, couples have three choices. They can 1) sell the house and split the proceeds; 2) agree to have one spouse buy out the otherís interest as part of the overall settlement; or 3) continue to own the house jointly. Each of these approaches has advantages, depending upon the situation of the divorcing couple.

Selling the house, a very common course, raises possible tax considerations, the problems of renting versus buying, and getting a new mortgage. At the least, both parties should know the basis for the property -- the original cost, minus improvements. Under current tax laws, each spouse may exclude up to $250,000 (or $500,000 as couple) from any capital gains tax if they have lived in the house for any two of the last five years.

A buy out by one spouse requires that the house be appraised independently. In this routine, after an appraisal, some couples dividing marital property often use a property settlement note. In this arrangement, one spouse pays the other a sum for a negotiated length of time at current interest rates.
A buy out gets one spouses name off the title, but it normally leaves his or her name on the mortgage. This may have an impact on a partyís credit rating.

Joint ownership often appeals to couples who want to keep their children in the same house until they finish school. In this arrangement, when the divorce happens, the couple become tenants in common, which means they each own half the house. Normally, the couple work out arrangements whereby one party, the one who stays in the house, pays the mortgage, while all other costs are split evenly. When the children finish school, the parties sell the house and split the proceeds.

If the house must be sold, the provisions of the sale should address how, when, by whom and in what manner that sale is to happen. These terms and conditions become even more important now as the housing market stagnates.

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#53: If you are divorcing in an "Equitable Distribution" state, please keep in mind that equitable does not mean equal, but rather what is fair. This means that property and debt is not always divided 50-50.
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