Disposition of the Family Home

For most couples the place they called home can be emblematic of the marriage. In the emotional tsunami of divorce, couples often act out melodramas of vindication that makes the house the symbol of the home, which now moves into the realm of a bittersweet memory of what was but is no more.

Letting go the house means letting go of the past, and that can be very difficult when a person’s world seems to be unraveling. The disposition of the family home can be charged with emotion, particularly for the wife who makes the home a nest for child rearing. Both home and house refer to a place of dwelling but differ in psychological and emotional affective connotations. A house is a building of bricks and mortar, wires and pipes, wood and tile; a home is a state of mind and a habit of the heart. People invite loved ones and friends to make “make yourself at home” and speak of nursing homes; members of Congress meet in the House of Representatives.

A modest bungalow where a loving couple nurtures each other is a warm and loving home; a McMansion occupied by a loveless husband and wife is just a big house. A home is an abode that provides peace, comfort, happiness, security and confidence — qualities not expected in a house of bricks and mortar. A home creates emotional attachment because of the feeling of ownership and shelter if provides its members.

A family living in a house for a time accumulates emotions and memories associated non-rationally with the abode that is their home, so when divorce shatters the status of the family, the home itself seems at emotional risk.

The affective connotation of the word home can steer a divorcing couple down a cul de sac to financial trouble. The decision to keep the house that had been the marital home demands both long-term and short-term thinking.

Many times, women who keep the marital home find themselves house poor, and a woman should throw a cold eye on a settlement that gives her the house, particularly if the settlement is short on liquid assets on her side. Judges are very inclined to award the house to the wife so that school-age children experience the least disruption (particularly in states where the courts enjoy discretion in the equitable distribution of property). This means that the equitable distribution of property may result in the marital home going to a mother, but the person awarded the marital home should be certain that he or she can afford to keep it. A house is a barren asset that pays nothing until it is sold and costs money to maintain.

For many couples, the home is their most valuable asset, so sale is often the only option if both parties are to receive an equitable share in the distribution of joint assets. In general, therefore, couples have three choices. They can 1) sell the house and split the proceeds; 2) agree to have one spouse buy out the other’s interest as part of the overall settlement; or 3) continue to own the house jointly. Each of these approaches has advantages, depending upon the situation of the divorcing couple.

Selling the house, the most common course, raises possible tax considerations, the problems of renting versus buying, and getting a new mortgage. At the least, both parties should know the basis for the property — the original cost, minus improvements. Under current tax laws, each spouse may exclude up to $250,000 (or $500,000 as couple) from any capital gains tax if they have lived in the house for any two of the last five years.

A buy out by one spouse requires that the house be appraised independently. In this routine, after an appraisal, some couples dividing marital property often use a property settlement note. In this arrangement, one spouse pays the other a sum for a negotiated length of time at current interest rates.

A buy out gets one spouses name off the title, but it normally leaves his or her name on the mortgage. This may have an impact on a party’s credit rating.

Joint ownership often appeals to spouses who want to keep their children in the same house until they finish school. In this arrangement, when the divorce happens, the couple become tenants in common, which means they each own half the house. Normally, the couple works out arrangements whereby one party, the one who stays in the house, pays the mortgage, while all other costs are split evenly. When the children finish school, the parties sell the house and split the proceeds.

If the house must be sold, the provisions of the sale should address how, when, by whom and in what manner that sale is to happen.

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