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Dealing With the Marital Residence

Don’t tie up all your capital in the family home. If you end up the out-spouse, that is, the one who moves out, the low monthly payment because of the substantial equity in the home gives the in-spouse and children use of virtually all the marital community property. For example, a highly appreciated home may be worth three hundred thousand dollars, yet have a monthly payment of only five hundred dollars on the balance of a fifty thousand dollar mortgage. The rental value of the home may be two thousand hundred dollars per month. The temporary support schedule may assume a housing cost for the in-spouse of fifteen hundred dollars, yet the true cost in this case is only one-third of that amount.

You may get an adjustment for the use of the residence under the support schedule. You may get the adjustment now, or later. Don’t gamble with your own money against the court if you can avoid it. Avoid putting all your money in your home.

The judge is not going to throw your spouse and children out when the simple solution is to have them stay in the family home until the case is over. With all the family assets tied up in the home, you can’t make a down payment on a home for yourself. You can’t even rent out the home to get any return on the equity. It doesn’t matter why all your capital is in the home; you may have sold everything to buy it last year, or it may have increased in value over the last ten years. If the equity in the home exceeds the value of the other assets, you won’t be able to divide the marital community property without selling the home.

Each spouse may be entitled to exclude from taxable income up to $250,000 in gain on the sale of the family residence if qualifies as a principal residence under federal tax law. See Chapter 13 for an introduction to the rules, and typical concerns.

Generally, the only solution is to sell the home and divide the proceeds. However, your spouse may request that she be allowed to remain in the home with the children for years. The legal reasoning is that your children would suffer if their life were upset even further by having to move out of their neighborhood. Of course, you have to wait to get your equity out of your home until you get your spouse out of your home.

The out-spouse goes to financial purgatory when the sale of the family home is deferred, having to wait for years to get his or her share of the equity. Because of their harsh impact, few of these orders are now granted: the children’s needs must be balanced against the hardship to the parent denied the use of equity in the home. The reason the orders are given at all: the primary interest of the court in the well being of your children.

Susan tried for a deferred sale order against my client Lou. Our psychologist testified the child would not be especially upset if he moved out of that particular home. The home could be sold and their child could still live in the same neighborhood. Our realtor testified that other homes in the same neighborhood were for sale at a price Lou could afford if the home were sold and the proceeds divided. The testimony of a rental agent that the rental value of the family residence exceeded the mortgage payment by more than one thousand dollars per month helped persuade the judge not to defer the sale.

Lou also received credit for the difference between the home’s reasonable rental value and the monthly mortgage payment made by Susan. She had exclusive use of the equity in this community asset at a time she was receiving adequate support.

What about transferring titled property from both names to your name alone? You’re out of luck unless your spouse signs a document giving you all rights in the property and signs another document giving title to you alone. That’s not the way a husband and wife usually operate; you may be facing a fraud action even if you’re able to do it, or the court may simply refuse to enforce the transfer.