What Happens to Your House During a Divorce
Divorce can be a long and complicated process. From the emotional strain, to legal affairs like having to update your life insurance, it can be one of the most stressful experiences a person might have. When it comes to divvying up assets, your home is probably the biggest of them all – and, in many ways, the hardest to divide.
When you’re getting a divorce, you always have the option of negotiating how assets are divided without the input of the courts, but things don’t always turn out that way. The rest of this article is written under the assumption that what happens to your home is being determined by a judge, as opposed to by a prenuptial agreement or a mutually agreed upon split of your assets.
Common Law (Equitable Distribution) and Community Property States
In order to understand what happens to your home, it’s important to know that the laws governing property vary from state to state. There are 10 community property states. They are:
- New Mexico
- Alaska (if you opt in; otherwise it’s common law)
The other 40 states are all common law states.
In a community property state, all assets that were purchased during the marriage are considered to be owned 50/50 by both parties – even if one party didn’t pay a dime for the property.
In common law states, the matter is more complicated – you need to have some vested financial interest in an asset for it to be considered a shared or marital property. More often than not, it’s simply a matter of looking at the deed. If both spouses’ names are on the deed, then they both (in most cases) are considered to have equal ownership of the home.
Separate property is a term for property that falls outside of the marital property category. This includes property that was gifted, and property that was purchased before the marriage, as well as property that is individually owned in common law states.
How The Home is Divided
In the case of separate property, division is simple: the person who owns the home keeps the home.
For marital property, things get more complicated. Optimally, in a 50/50 split, the parties would sell the home and divide the money. Things rarely go that simply, however.
A home is much more than just an asset; it’s a place of security. As such, keeping a home is deemed necessary in many cases when the couple who are getting divorced have children. In many cases, judges will decide that the primary caregiver needs to keep the home in order to provide for the children.
A judge may use a number of different factors to decide who keeps the home, assuming the judge decides the home isn’t simply to be sold. These factors include:
- Each of the spouse’s finances
- The contributions both made to the home
- The spouse’s physical and mental capacity, and their capacity to work
The judge might also account for marital misconduct – if there are situations of abuse, for example, the judge may be more likely to grant the home to the victim.
Even if the judge grants possession of the home to one party, they’ll strive to create a situation in which both parties are fairly compensated for their financial stake in the home. They can go about this in a number of different ways. One common method is to allow the party who isn’t keeping the house to keep more of the couple’s other assets to make up for their share of the house.
Another option is to have one party buy the other party out of their share of the house. Should this prove impossible, and should there not be enough other assets to balance out one party’s share of the house, the judge may order a “deferred distribution”. This commonly takes the shape of an agreement to sell the house as soon as the oldest child of the couple turns 18.
This is only a brief look at some of the incredibly complex scenarios that can occur with real estate during a divorce. Even this quick overview gives you an idea of the stakes at play, and the importance of hiring a real estate litigation lawyer should you not be able to come to a compromise amicably.