Divorce and the Family Home
The marital home can be an emotional topic for many New Jersey couples who are deciding to divorce. Of course, couples living in a relatively new home may feel less emotional attachment to their residence. However, couples who have shared a joint home for years, especially if they have raised children or have kids there now, may be especially attached to the property. It can also be one of the most valuable assets (or most costly liabilities, depending on the size of the mortgage) to deal with during a divorce settlement.
Dividing the Home in a Divorce
Determining who will keep the home after a New Jersey divorce can be a financially and emotionally difficult question. In order to conclude an equitable distribution of property, dealing with real estate is often a key question. It is often a very valuable asset while also holding significant sentimental value. There are three major ways in which people and their family lawyers may negotiate to handle a home during a divorce:
- One spouse keeps the home, buying out the other’s interest
- The home is sold, and the equity distributed as part of the divorce property division process
- Spouses and their divorce attorneys negotiate a solution in which one spouse stays in the home for a specific period and the home is sold after the children graduate from high school or turn 18
There are other potential solutions, but these are the most common. The right answer for your divorce depends on your unique circumstances, including your financial health as a couple and the amount of other assets that you may have. In some cases, the couple’s assets and the sentimental value of the home may mean that keeping the home is the best outcome, while others may find that selling the home is the best choice.
If you and your spouse have significant financial assets, keeping the home may be an easier choice, although it may still be a difficult question to reach an agreement on, due to the sentimental value. If one person keeps the family home, the other person may keep other large assets, such as an investment portfolio, retirement assets, vacation home, art collection or investment property. You and your family lawyer will likely have a complex set of questions on property division in a high-asset divorce. This may include hiring experts to assess the value of all substantial assets to properly determine an equitable division.
This is one of the simpler ways to divide a marital home in a divorce. However, it relies on a couple having a substantial amount of high-value assets as well as reaching a settlement about the sentimental weight of the marital home. For many couples, there is no other asset of equal value. If one partner feels strongly about keeping the home and has the financial ability to do so, one party may buy the other out of the home for half of the market value of the property. In most cases where there are no other marital assets of equal value to assign to the other spouse, the spouse keeping the home will need to refinance or seek a new mortgage in their sole name. These funds can be used to compensate the other spouse as, essentially, a real estate transaction embedded in the divorce.
Your divorce lawyers can work with you to ensure the buyout takes place in a legal and equitable manner. Of course, the party staying in the home will need to have the credit and income required to qualify for the mortgage they may need to take sole ownership.
Home Co-Ownership After Divorce
Some New Jersey couples, especially families with children, may agree to co-own the home, especially for a limited period of time. In most cases, this solution is best for couples with a relatively amicable divorce and few difficulties reaching a settlement through their family law attorneys. This is generally done to give the children a greater sense of stability. Each party will agree on how the mortgage payments will be made, whether they will be split, and how sale proceeds will be distributed after the time the home is to be sold.
The two parties will remain financially entangled with this solution, although neither party will need to buy out the other and incur the costs and mortgage evaluation that come with that process. There may be concerns about the tax liabilities in selling the home as well as ensuring both parties remain financially capable of upholding their end of the bargain. However, co-parenting couples will often have intensive engagement with shared custody and parenting plans, and managing the home payments may be part of their co-parenting arrangement.
Selling the Marital Home
Many other couples may simply decide to sell the home during a divorce. If the house is still highly mortgaged and neither party can afford it alone, selling the home may be the most viable option to protect both spouses’ financial futures. Selling the home during the divorce can also help to ensure that both parties benefit from the relevant tax exemptions on capital gains taxes from the sale of their primary residence. Even if both parties will file their taxes separately in the next year, they can still benefit from the tax exemption by selling their home during the divorce process.
Selling the home and distributing the proceeds, based on the input of both parties into the home purchase and other equitable considerations, can also be a simpler solution. If a couple and their divorce lawyers are finding it difficult to negotiate a financial settlement for asset division, selling the home may be an easier choice. It removes speculation about the value of the home and future financial entanglements from the negotiation process.
The sale process must be part of the divorce negotiations, and each party’s family law attorney should be involved in the process. Both parties may need to make agreements about what level of offer they will accept, any fixes or renovations to be completed before the sale of the home, and how the burden of paying costs associated with the sale will be shared. Both parties and their divorce attorneys should keep an open conversation about offers, valuation and timing of the sale while aiming to achieve a fair market value for the home.
New Jersey is an equitable distribution state, so the proceeds from the sale of the home do not need to be divided exactly in half, but usually, absent compelling reasons to the contrary, they are The right solution for distributing the value of the home may vary from couple to couple, and your respective divorce lawyers can negotiate a settlement that reflects the interests of both parties. The value of the home is part of the complete financial settlement to conclude the divorce.
Of course, in a heavily contested divorce that goes to litigation in family court, the judge will determine how the home is divided and the proceeds distributed. High-conflict divorces may be more likely to include the sale of the home in order to effectuate a clear financial settlement and conclude the divorce.
Dealing With Real Estate During a New Jersey Divorce
Whichever option you decide to deal with the marital home during a divorce, it can be a major part of any settlement process. A family law attorney may provide guidance and representation for you throughout the process. Contact the experienced New Jersey divorce attorneys at Lawrence Law by calling 908-645-1000 or using our secure online form for a consultation at our Red Bank, or Watchung, New Jersey, office.