One of the most heart wrenching aspects of divorce is that a couple must decide what happens to the family residence, the marital home. 

Most couples face a hard financial shift when divorcing and much of that is a result of going from one family residence to two.  Keeping the house, they have called home, while married can be difficult.

If you are in a comparable situation, consider a list of options other couples put together based on their own marital home dilemma.     See disclaimer below...

Both remain owners

Keep the home titled as it is (in both names, one name or otherwise) with both borrower's remaining on the mortgage.

Some things other couples have done to protect one or both parties,

• Limit this arrangement to a specified time before requiring the property to be refinanced or sold.
• Ensure the specified time meets the requirements for the IRS codes specific to exclusions of capital gains tax for divorce buy-outs and home sales.
• Specify who pays the mortgage payments, upkeep of the home or future renovations.
• Specify who pays for professional services regarding a future buy-out, sale or refinance.
• Have a plan for the possibility that one party is unable or unwilling to pay for his/her share of the mortgage or maintenance of the home (relying on the divorce decree often proves fruitless when it comes to maintaining one's credit and housing).
• Detail how the home's equity will be distributed upon sale or refinance (both parties agree on an appraised or market value of the home at the time of the divorce as well as the time of sale or refinance and/or limited to the time each party occupied the residence and/or based on the involvement in upkeep and/or financial obligation following divorce). 

Both sell

List and sell the home based on specific guidelines as part of the separation agreement and/or terms of the settlement agreement merged and/or incorporated into the Final Judgement of Divorce.

Some things other couples have done to protect one or both parties,

• Hire a professional to assist in the sale of the property.
  • Develop a complete sale plan with a reputable agent/broker regarding the sale of the home to include list price, bottom dollar (minimum sale price the couple will take minus repairs, modifications, commissions, and professional services).
  • Locate a discount broker and manage the sale themselves while still listing the home on the MLS and offering a cooperating broker's commission (usually based on the minimum prevailing rate).
• Develop a back-up plan (in writing) if the home does not sell immediately.
• Consult a tax attorney, accountant, or other tax professional regarding capital gains, exclusions and/or liability.  Consider how the loss of the property as a tax shelter can affect one or both parties.

Exchange like assets

One party keeps the home while another takes another asset of equal worth and/or liability.

Some things other couples have done to protect one or both parties,

• Evaluate, evaluate, evaluate.  Smart spouses ensure the value, future value, and tax liability of these like assets by consulting multiple, reputable and relevant consultants, and professionals.
  • Remember that assets purchased or attained at various times may have varied tax liabilities that can affect the overall value and therefore the fairness and equitable division of the assets.
• Understand their legal rights based on the statutes and regulations pertaining to divorce in their state. 
  • Know if the state where they are processing their divorce is a Community Property State or an Equitable Distribution State.
    • Understand how these vary and how the couple's assets could be divided if the case went before a judge.

Buy-out one party 

One party keeps the home by paying or receiving an amount that would be fair to the other party or as deemed equal or fair (based on state property laws) according to a judge's ruling.

Some things other couples have done to protect one or both parties,

• Evaluate, evaluate, evaluate.  Smart spouses have ensured the value, future value, and tax liability of assets by consulting multiple, reputable and relevant consultants/professionals.
  • Each party knows the immediate and/or long-term tax liability depending on how the home is owned, sold and/or refinanced.
    • Remember that assets purchased or attained at various times may have varied tax liabilities that can affect the overall value and therefore the fairness and equitable distribution of the assets.
• Understand each spouse's legal rights based on the statutes and regulations pertaining to divorce in their state. 
  • Know if the state where they are processing their divorce is a Community Property State or an Equitable Distribution State.
    • Understand how these vary and how the couple's assets could be divided if the case went before a judge.
• Make sure the buy-out makes sense regarding living arrangements for the leaving spouse, as well as ensure he/she will have enough funds to initiate a second household (immediate and long-term) following the buy-out.
• Make sure the staying spouse earns and has a high likelihood of continuing to earn sufficient income to pay the mortgage and any associated fees (HOA or otherwise), taxes and upkeep (immediately and long-term).
• Make sure the staying spouse has the funds needed for the buy-out and can process the buy-out prior to the issuance of the Final Judgement of Divorce.

Disclaimer: Consult an attorney to clarify and understand your legal rights.  You should understand how best to protect your interests through legally documenting your decisions in a separation and/or settlement agreement. There are numerous legal factors, specific to your state(s) property laws, that your attorney should explain that are not part of this article.  The information in this article is not provided by attorneys, is not legal advice and should not be used in place of legal advice and/or representation.  Please refer to our site's disclaimers as they apply to this article.

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