Following a divorce, one of the important considerations in property division is the marital home. Depending on whether the house is community or separate property, the spouses will decide who gets to keep the house, whether they are interested in selling or buying it out. Keep reading today’s blog to learn more about the post-divorce property division options when it comes to the house.
Who Gets to Keep the House After the Divorce?
There are many things to keep in mind when deciding who will keep the marital house, such as where the children will live afterwards, whether either spouse can afford to keep the house after the divorce, and tax implications. The decision usually comes down to whether one spouse keeps the property or if they are interested in selling it. The decision to sell will depend on who is legally deemed the owner, though.
Community Property
In California, there is a presumption that property acquired during the marriage is community property, which means the property is owned by both spouses equally, unless one spouse had acquired it through an inheritance or gift. In a straightforward case, the spouses bought the home together during marriage using community property funds (income earned during the marriage) and are both on the title. In this case, both spouses share equal interest, and ownership of the house will likely be divided equally between the spouses.
In some cases, however, facts regarding the ownership of a home are not that simple. For instance, the title to a home purchased during marriage could be in the name of one spouse only. In such a case, the title creates a presumption that the house is separate property and belongs only to the spouse whose name is on the title. The other spouse can overcome this by showing that the spouses had an agreement that the house belonged to the both of them despite the title, though this will require strong evidence, such as written terms of a prenup.
Separate Property
Separate property is property owned solely by one spouse. Separate property could be a home that the spouse bought before the marriage. A spouse who is not on the title but contributes money to the mortgage or payments for improvements to the home during the marriage, though could be entitled to community interest in the property due to their contribution. This is commonly the case with long marriages. While community property is divided halfway between both spouses, separate property will be given exclusively to the owner-spouse.
Sell and Buyout Options
Spouses can agree to sell their home and split the profits from the sale. This is often the only feasible option when neither individual is in a financial position to own the home alone. Alternatively, one spouse can take full ownership of the home and pay the other spouse their share. Be aware that the spouse who chooses to buy will need to refinance the home, as the selling spouse will be removed from the mortgage.
To determine whether the buying spouse can afford to take full ownership of the home, costs to be considered are:
- monthly mortgage payments;
- insurance;
- utilities, repairs, maintenance; and
- property taxes.
In addition, sometimes the court will order, or spouses will agree, to include a provision that the selling spouse pay the mortgage as a form of spousal support. In this case, the spouse paying the mortgage can claim a tax deduction for spousal support payments. The spouse keeping the home would need to claim those payments as spousal support income, but they may still be eligible to claim a mortgage interest tax deduction.
Deferred Sale
When the spouses have minor children together, the court may order a temporary delay to the sale of their home, called a “deferred sale of home” order. In this situation, both spouses continue to own the home jointly for a set period, giving the custodial parent exclusive use and possession of the home during this time. This is meant to minimize the impact of the divorce on the children and facilitate a smoother transition in the children’s best interests.
Note that in considering a deferred sale order, the court must first determine whether the spouses will be able to afford the payments on the house after the divorce. The court will then look at the spouses’ incomes, the availability of support, and other funds available to make payments. If the court decides that a deferred sale is financially feasible, they must finally determine whether a deferred sale is necessary to minimize the impact of the divorce on the children. The court will consider all the following factors:
- the length of time the children have lived in the home;
- the children’s ages and grades in school;
- how close the home is to the children’s school, childcare, and/or other services the children use;
- whether the home has been modified to accommodate a physical disability of a child or the custodial parent such that moving homes would make it more difficult for the custodial parent to meet the children’s needs;
- the emotional impact moving homes would have on the children;
- the extent to which the location of the home allows the parent living there to maintain employment;
- the financial ability of each spouse to obtain suitable housing;
- the tax consequences a delayed sale would have on each party;
- the negative financial impact a delayed sale would have on the parent not living in the home; and
- any other factors that the court finds are relevant and fair to consider.
Keep in mind that an order for a deferred sale will specify how long the order will remain in place, after which time the spouses will sell the home.
Let a California Divorce Attorney Help
If you are in the process of a divorce, one of the first things you might be wondering is who gets to keep the house. It is in your best interests to work with an experienced attorney on this matter, as they can provide you the legal guidance you need to proceed with the buying or selling option, as well as examine an existing prenup and consider the children’s needs.
Schedule a free consultation with Claery & Hammond, LLP to discuss your next steps in the property division process.