marital property

Best Practices To Handling Real Estate in a Divorce

In many divorces, the biggest single assets are the retirement funds and the residential real estate. Sometimes, the only issue preventing an agreement is what to do about the house.

Some of the options for dealing with the marital residence are:

Award it 100% to one spouse;
Sell it and divide the sales proceeds;
Keep it as a joint asset after the divorce; or
Award it to one spouse but allow the other to reside in it for some specified period after the divorce.

Award 100% Of The Residential Real Estate To One Spouse

The most common means of dealing with the house is to award it to one spouse. There are a variety of reasons for this:

1. It can be the least disruptive for children.
2. It makes more sense to award the home to the lower-earning spouse if he or she is unable to purchase a home after divorce.
3. One of the spouses might have a strong sentimental attachment to the home.
4. The mortgage payment could be less than is now available to either spouse.
5. The mortgage payment might be less than the rent for an equivalent residence.

Residential Ownership And The Mortgage Are Separate

People sometimes assume that when a divorce decree awards the residential real estate to one spouse, the mortgage automatically changes so the one who wasn't awarded the house is no longer responsible for the loan. This is erroneous. The mortgage company has two signatures on a loan. Simply because those two people divorce and one of them no longer owns a part of the house does not change the loan. It is analogous to a co-signer who is not a part owner but co-signs the loan. The only way to take a person’s name off of a mortgage is to pay off the loan, sell the property, or refinance it. Refinancing requires the spouse who will receive sole ownership of the house be able to qualify alone based solely on his or her income.

In Florida, A Deed of Trust to Secure Assumption can be used when both parties will remain liable for the mortgage after the divorce.

In most cases, awarding the home to one spouse in a divorce decree is not sufficient to convey ownership. Although a divorce decree can be sufficient, most do not usually contain all of the language used in a deed. Years after the divorce, the spouse who received the home could have problems with a title company when he or she tries to sell it. Usually, the spouse who will no longer own part of the house signs a Special Warranty Deed. A Special Warranty Deed’s primary purpose is to aid with the sale of the real estate by the spouse to whom it is awarded. It is recorded with the county’s real property records and shows a clear chain of title from the original seller to the spouses jointly, and then solely to one spouse after the divorce.

Sell The House And Divide The Proceeds

This is relatively simple. The parties simply agree, or the judge orders, the property will be sold and the proceeds divided according to a percentage. The details of who will have authority to choose the realtor, set the listing price, and accept an offer must be worked out in advance, as well as who will live in the house and how the mortgage will be paid while it is on the market. As with everything else in divorce, if the spouses cannot agree about this the judge will decide.

Keep The House As A Joint Asset After Divorce

It is not generally a good idea to be in business with your ex-spouse. With all of the emotions involved, and the need to move on with your life, try to avoid joint ownership of real property after divorce. Occasionally, it is the best option under particular circumstances.

Award The Home To One Spouse But Let The Other Live There

When the children will live with the parent who cannot permanently afford the house, it is sometimes good to award it to the one who can afford it. Then let the other live there until the children graduate high school. This might require the parent who will ultimately receive the house to pay more than the child support required by law. The paperwork required for this arrangement includes the two deeds described above, and then the parent who will remain in the house temporarily leases it from the other after the divorce.

Seek Legal Advice

A house is just one part of a divorce. It can be more complicated than most people realize. Few try to sell or buy a house without a realtor and a title company. If you are in a divorce or thinking about one, and you own a home, it may not be a good idea to try to complete the legal process without the assistance of an attorney.

Can a Home Purchased Before Marriage Be Considered Marital Property at Divorce?

When a person buys a home before he or she is married, this property is usually considered his or her own separate property and not marital property. However, the other spouse may have a right to some of the home’s equity upon divorce despite this classification. Here are some of the many issues that may very well have an effect on how that property is treated by the courts.

By Agreement.  If the couple entered into a valid prenuptial or postnuptial agreement and this agreement specifies information about the property, the terms of the agreement will dictate how the property is divided, if at all.Common Law Divorce.  The vast majority of states use a common law system regarding property ownership. In these states, the deed, registration or other ownership document often indicates which party owns what. If both parties’ names are on the title, they each own a half interest in the marital property. Property that was owned prior to the marriage is usually considered non marital property, along with individual gifts, inheritances, personal injury awards, non marital property acquired in just one spouse’s name that is not used for the benefit of the other spouse and property agreed to be separate. Upon divorce, the court seeks to divide proper equitably, which means fair but not necessarily equal.

Community Property Divorce.  In community property states, spouses usually own an equal interest in all marital property acquired during the marriage without regard to whose name the property is titled in. Also, the spouses own an equal interest in the income owned by either spouse during the marriage and an equal interest in debts incurred during the marriage. Separate property includes gifts that are made to one spouse, inheritances and property acquired before the marriage and that is maintained separately.

General Rule.  A home that was purchased prior to the marriage and owned by one spouse is generally considered separate non marital property and is not subject to division. However, there are many exceptions to this rule.

Increase in Value.  If the value of non marital property increases during the marriage, the non-owner spouse may be entitled to a portion of the increased value. This can occur when the non-owner spouse’s efforts are used to help maintain or improve the property. This can also occur if a non-owner spouse’s funds were used to pay down the mortgage or improve the property. Courts may look at whether the increase in value was due to active rather than passive appreciation. Passive appreciation occurs when the property’s increase in value has more to do with the market or the lapse in time rather than the efforts of the owner. Active appreciation involves some type of actual effort. Some states allow the non-owner to receive a portion of the passive appreciation while others split only the active appreciation. Although the non-owner spouse may be able to receive compensation for a portion of the home’s equity, he or she will usually not receive the property itself outside an agreement by the parties to do so.

Some common law states begin with the premise that the marital property subject to division should be divided equally unless there is cause for a different distribution. Therefore, the increased equity in the home may be subject to being divided in half between the parties. However, other states use a number of factors to determine how marital property should be divided. These factors may include the length of the marriage, the separate property of each party, the age and health of each party, the earning capacity of each party, the education and skills of each party, whether the parties have children and other obligations or other factors that can help inform the court of what constitutes an equitable distribution.

Some states also consider whether the non-owner spouse’s funds were used to refinance the house. Additionally, if the owner puts the non-owner spouse’s name on the deed, the home may then be considered marital property and subject to division.

Legal Assistance.  Due to the complexity of this issue, individuals who believe that their spouse may have a stake in a premarital home may wish to consult with a family law lawyer for guidance. He or she can explain the rules that are followed in the jurisdiction where the divorce case will be held and the rights of the party. He or she may also help negotiate a fair settlement with the other party.


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