"Where were you born? Where is your home? Where are you going? What are you doing?  Think about these once in a while and watch your answers change."  -Richard Bach

Before you negotiate

While divorcing, your primary residence purchased with your spouse will be referred to as the marital home or marital residence.  Your portion of the ownership and liability will be part of the marital property division, formerly established and recorded in your Final Judgement of Divorce. 

The marital home has both a monetary and emotional value attached to it.  However, in the interest of sparing yourself increased stress, legal costs and emotional burden, it's best to consider your house and home individually when trying to formulate a separation agreement with your spouse.

Plain and simple

Your house is possibly your largest asset in your estate and likely the one with the biggest liability (mortgage).  


Your home is the place you live day-after-day.  It's the place that you should always have love, family and hope.  Your home is wherever you live. Its physical location may change many times throughout your lifetime.  It has emotional value.  The feelings you have for the home you made with your spouse may distort your sound judgement when considering the house and its financial value.

State Laws

Also, get to know the laws in your state regarding the division of marital property.  You will be a more informed negotiator when you have a general understanding of the statutes and regulations a court would use to divide your marital estate should your negotiations fail, and your case end up before a judge.


Our article is meant to provide general information regarding marital property division.  We are not attorneys.  If you seek legal advice or interpretation of your state's laws, you should consult your attorney or an attorney in your area.

These legal experts will be able to explain the specifics related to your state laws as they apply to your individual circumstances and goals in establishing your settlement agreement or preparing for trial.  Review our Legal Guide for tips about hiring an attorney and the DMK Legal Directory to locate a legal expert near you.

Determining the difference between house and home?

Emotional value of the house

Your house will be the subject of much debate in a divorce.  You painted, decorated, cleaned, landscaped and maintained it.  You payed, insured and mortgaged it.  It's the financial representation of the place you hung your proverbial hat every night after a long day at work.   It provided you an opportunity for security and pride which, like many of us, needed 30 years or more to pay-off.

As the house ages, its value appreciates or depreciates.  It's common for it to be financed, refinanced and eventually sold.  Despite some legal terms that refer to your house as a "marital home", know that legally you are only determining the distribution of the value and possession of your house as a marital asset, not your home.   The house also has emotional value, but mostly for different reasons.

Your emotional value of your house is greatly affected by its financial worth to you, inclusive of sweat equity, paid-in equity & marketable appreciation. 

e.g., You may be upset that your spouse would get half of one of the biggest financial assets you both own despite your opinion of their not "earning or deserving it".  

When spouses have their home's emotional value tangled up in their sense of value for their house it can cause a great deal of setbacks and delay in establishing an efficient and fair settlement.   This may eventually lead to a judge or arbitrator making the decision, which may result in neither spouse's satisfaction with the result.

Since your house may need to be sold or refinanced at an inopportune time or in its best condition (based on the timing or planning of your divorce), you and your spouse will need to be extremely reasonable when it comes to the home's marketable, appraised and/or otherwise established value by the "powers that be" (e.g. Realtor®, mortgage broker, appraiser, tax assessor, current mortgage company, current real estate market, etc.) in order to efficiently settle the division of assets prior to the divorce judgement or within the parameters specified within said judgement.

Emotional value of the home

You may really like or even love your home.  It may have all the qualities that make it right for you.  However, remember that a divorce is not about walking away with everything you had before the judgement.  It's about splitting everything apart.  You will have to give up many things that, perhaps you do not want to relinquish.  

Emotions are part of divorce, just don't let them overshadow the goal to split your lives, assets and family with the least amount of misery possible.

e.g., You may be very upset that you have to start a home somewhere else while your spouse can keep his/hers in the same residence.  It may make you feel you have lost more than your marriage and cause you to waste a great deal of time and money fighting over who keeps the house, its contents and potential future equity.  All the while, after the mortgage and expenses, the financial value and emotional baggage that comes with it may not make fighting over it financially and therapeutically helpful.  Professional advice may help you more objectively make decisions in these matters.

Negotiate the distribution of the house's worth as a financial asset as much as possible

Your home is so much more than a financial representation.  But, somehow, for many of us, the house we have known as our home is still never easy to let go.  Somehow, it would be so much easier if we could separate feelings for our home and the emotional and financial attachment to our house when negotiating a divorce settlement.  Realistically, it's not so easy to do.  The best many of us can do is to keep the differences of your house and home top of mind while in the negotiating phase of the divorce.

Who keeps the house?

If you want to keep the house, it's important to realize the financial responsibility in sole ownership.  It will be challenging in every aspect from maintenance to financial costs.  You should establish income and/or reasonable support payments that would provide adequate resources now and in future years. 

If you and your spouse can't agree on terms regarding who keeps the house and a prenuptial agreement wasn't previously established, then the judge will make the decision regarding the distribution of marital property.   Everything acquired after marriage is considered marital or community property and is subject to division in a divorce.   How the property is divided depends on the circumstances of your case and the laws of your state. 

Community Property States

If you reside in a Community Property State, then the judge will divide community and marital property as evenly as possible.  In these states, all marital property is either community or separate property.  This means that if your spouse purchased the house in his name before the marriage, then the property is considered to be owned separately by him.  If the property is purchased by both spouses and both names appear on the deed of trust, then the court recognizes the house to be community property whereas both spouses have 50% ownership.

The court will then usually divide the value of the house and all community property evenly.  This means the house will either be sold, and the positive or negative equity usually split between the spouses 50/50 or the home will be awarded to one spouse with the buy-out terms established.  There are many ways to determine the buy-out terms and who actually keeps the house and who will pay for their portion of equity based on the value of the house and other factors associated with the terms of the divorce and state laws.

Equitable Distribution States

If you reside in an equitable distribution state, each spouse will get a fair percentage, which may or may not be a 50/50 division of the marital estate.  This means, if you and your spouse are unable to negotiate the terms, community property will usually be divided according to the judge’s opinion of a fair distribution based on a multitude of factors to include but not limited to income, financial contributions and earning potential.  When determining the fair division of marital property in equitable distribution states, separate property is considered, but not included, in the allocation of marital property.  The buy-out would be different from a buy-out in a Community Property State in that the buy-out may not represent half of the market value or negative equity.  


Upon determining which spouse keeps the marital home, a buy-out is often established.  The terms of the buy-out are based on the laws of the state, circumstances of the case and the property's equity (value over debt) or negative equity (debt over value).  Usually, the spouse who remains in the house pays the other spouse their portion of the equity according to the property's value.  If the property has negative equity, then the leaving spouse usually pays their portion of the loss to the residing spouse.  The terms of refinance or deed transfer are part of the agreement.  The portions of the equity due to either spouse are affected by the state laws as noted above (community property states or equitable distribution states). 

Usually there's not a capital gains tax liability incurred by the selling spouse (when transferred to the other spouse) in divorce situations.  However, you should refer to www.irs.gov/taxtopics/tc701 or tax, financial and/or legal professionals for more information.


Often the courts will consider which parent will be the primary caregiver and do the majority of child rearing and award the house to that parent.  It doesn't necessarily mean that either parent must be able to immediately initiate a buy-out.  Some factors include: an unfavorable real estate market, negative equity, poor credit or inadequate financial resources.

The couple or court can establish terms that allow the couple to maintain co-ownership of the house following the divorce.  The terms would include, but are not limited to distribution of mortgage payments, when payments are made and who makes them, the length of the co-ownership agreement (when the property must be sold or refinanced), proceeds or debts incurred from the sale.

Be aware that both spouses, despite a strained relationship, in most cases, will be responsible for the mortgage (in the eyes of the mortgage company) until the property is sold or refinanced regardless of the court established agreement.  This means that both are affected regarding debt-to-income ratios and payment history among other liabilities such as taxes and community association fees. 

If you both remain on the loan and your spouse is ordered to pay for it, but doesn't, your mortgage company will still come after both of you.  You will then need to pursue your loss legally against your former spouse.  The best way to protect yourself is with an experienced attorney who properly words your divorce judgement for added protection in the case your ex files for bankruptcy or falls delinquent on his/her portion of the mortgage.  Regardless, your credit will be affected, and you could lose your home. 

If you are not the spouse who remains in the marital home and you do not reside in it for 2 of the previous 5 years, you may be responsible for capital gains tax on the proceeds from the sale when applicable.  You should maintain documentation from the divorce detailing the arrangement (your former spouse to reside in the home, while you live elsewhere, but maintain co-ownership) pursuant your divorce settlement established as a court order. 

You may qualify for the exclusion on the basis of the resident, though you are a nonresident.  However, this is not guaranteed, and you should consult tax, financial and/or legal professionals for advice.   Again, for more information, limits and guidelines regarding capital gains, visit www.irs.gov/taxtopics/tc701.

Sell the home

If both spouses or the judge decides to order the sale of the property, then the proceeds or debts incurred will be split according to the laws of your state and circumstances of your case.  Keep in mind if you do not meet the criteria set forth to avoid capital gains tax (such as owning and occupying the house for two consecutive years) you will be liable for tax from the proceeds of the house.  There are some exclusions such as certain circumstances involving members of the military.

Selling the house can give both spouses reduced hindrances of buyouts, refinances or co-ownership following divorce.  It will possibly provide extra proceeds to pay off marital debts or attorney's fees following the divorce and often make it easier for both spouses to qualify for a new residence (also based on other credit worthy factors).           -OurDMK.com


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