Who owns the marital home matters when you get divorced because it can influence your financial well-being and possibly your custody (if you have children). Asset division and determining child custody are MAJOR factors in divorce. They constitute two out of the three areas to discuss and outline for your divorce decree or settlement. (So you’re clear, the three sections of a typical divorce include: asset and debt division, determining cash flows/support between spouses, and child custody.) How you divide your assets and how you determine your custody will hugely impact your life moving forward.
Who Owns The Marital Home Now?
In order to understand who currently owns your marital house you need to look at several critical factors, including what type of state you live in: community property or equitable division, is the house a joint asset or a separate asset, and who’s on the title.
Community Property Or Equitable Division?
There are two types of states when it comes to divorce: community property states or equitable division states. And which type of state you live in has the potential to influence how you handle your division of assets.
According to Legal Zoom there are nine community property states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. And Alaski is an “opt-in” community property state. The remaining states are equitable division states.
In community property states the division of marital assets is equal: fifty-fifty. In an equitable division state, the goal is to create a fair distribution of assets and debts, and it’s not always exactly equal.
Joint/Marital Property Vs. Separate Property
Both types of states recognize joint/marital and separate property. It’s important to understand the difference between marital (or community) and separate property.
Separate property typically is limited to property or assets that:
- You or your spouse owned prior to the marriage
- You and your spouse agreed would be separate in your prenuptial or postnuptial agreement
- Was received as an inheritance to you or your spouse
- Was received as a gift to you or your spouse
- Was awarded to you or your spouse (such as disability, or the settlement of a dispute)
Separate property can lose its separate status if it is commingled with marital funds/property.
Joint/Marital/Community property constitutes all property and assets acquired during the marriage, despite who earned the money, or whose name is on the title. Family Law Attorney Laura A. Wasser explains the community property formula in her book It Doesn’t Have to Be That Way as “everything earned or acquired during the marriage–all assets, all income, and all debts or liabilities, everything except gifts and inheritances.” She goes on to elaborate that this “is the case even if one of the spouses did the acquiring, or earned the income, or incurred the debts, and even if just one is listed as the owner of the property or asset.”
What Does This All Have To Do With Who Owns The Marital Home?
Is your house considered a joint/marital asset or separate property? How to determine if the house is joint or separate property can become complicated quickly. There are many shades of gray when it comes to homeownership. If you bought it during the marriage with marital funds, it’s a joint asset, and both spouses own an equal or equitable share.
What if that’s not the case? What if the down payment came from an inheritance? Or a gift from your parent? Or money that you earned before you were married? What if you or your spouse owned the house before you were married?
In certain circumstances, the house or a portion of the house, may be considered separate property. One instance might be if you bought the house before you were married, kept it titled in your name only, had it paid off completely with separate income, and didn’t use any marital assets to remodel or pay the mortgage, upkeep, property taxes, etc. But if you did not do all of the above, it’s likely that some marital funds have been used to maintain the family home. Even if you came into the marriage already owning your home, if you’ve added your spouse to the title and/or used joint funds to maintain the home, a portion of your property has become joint. Your ex will be entitled to a percentage of the value created in the house. It’s up to you, your spouse, and your divorce team to figure out what that figure would be.
As you can see from above whose on the title can be an important factor. If you’re not sure, you can look up your title on public record, or reach out to a title rep to pull your title for you. Additionally, if you’re both listed on the title, and you want to remove your spouse, you’ll need to file a quit claim deed. Frank Winburne of Lawyers Title shares that “Because California is a community property state, unless a spouse records a quit claim deed giving up their interest in real property, the proceeds of the sale of real property is shared 50/50.”
A quitclaim deed can be prepared by an escrow company, an attorney or a company like Lawyers Title. He goes on to explain that property acquired as separate property (prior to marriage or gifted or inherited) is handled differently than community property, and can get very complicated in a divorce. “Because distribution of proceeds from the sale of property can vary, determining how is a function of the court in a divorce proceeding.”
It Affects Your Net Worth & Lifestyle Moving Forward
Keeping the marital home after you’re divorced can be psychologically and financially loaded. I have some clients who HAVE to keep the house no matter what, nd do not realize what a financial hardship it will be on them. In Los Angeles where I live and work, the cost of housing is astronomically high. Most households with two earners are struggling to pay the mortgage, and still have a balanced lifestyle. When you divorce the assets and income that supported one household now have to support two. Often there just isn’t enough to feasibly do that without making some adjustments.
Working with a financial advisor can help to determine if keeping your marital home is a smart goal, or even a possible option. Make a list of what it costs each month, and each year, to maintain your current home. Typically expenses include but are not limited to: mortgage, property taxes, insurance, utilities, and maintenance (gardener, pool, paint, roof, drainage, brush clearance, repairs, HVAC filters, HOA dues, etc.). Don’t forget any annual or semi-annual expenses. Run various financial scenarios — one in which you keep the house, and one or more in which you buy a more affordable property and/or rent. What happens to your net worth over time? Taking a look at the numbers may help you to see home ownership in a different light.
One such financial advisor, is Jason T. Reynolds with Collaborative Financial Consulting. Reynolds agrees that determining who will keep the family home–or whether it will be sold to a third party–can be one of the most difficult decisions in a divorce. “Emotionally, selling will not always be the easiest, especially if you raised your children in that home or have other fond memories,” he says. However, it’s important to take the emotion out of the decision, if at all possible.
From a financial standpoint, Reynolds believes that selling the home and splitting the profit may be the cleanest way to deal with the mortgage. He explains that the proceeds from the sale of the home can be the cornerstone of creating the financial plan for your new stage in life. “With the increasing value of California [as well as other area] home prices in recent years the value of the family home can be a disproportionate percentage of your Net Worth,” says Reynolds. “Divorce may provide an opportunity to evaluate how to reallocate those funds and to build a balanced and tax-efficient portfolio that will ensure your financial independence many years into the future.”
If after looking at this decision from all the angles, you decide you’d still like to keep the family residence after you divorce, there’s one more issue to consider: the mortgage.
Who Owns The Marital Home? Hint, Their Name Is On The Mortgage
And if it’s yours and your spouse’s can you qualify on your own? According to Mortgage Director Mike Cook with WaterMark Home Loans, most divorce decrees will require that the post-divorce owner of the home refinance in order to remove his or her former spouse’s financial responsibility. He says “Despite this, it is not uncommon for the individuals to fail to consider the ability to qualify for the refinance during divorce negotiations.” He goes on to explain that there are numerous obstacles that a recently divorced individual could encounter while attempting to refinance. “For example, most loan programs require a significant history of receiving alimony and/or child support before being able to use it to qualify for a loan.” So, if a potential refinance borrower was not employed during the marriage they may have difficulties during the loan process.
His advice: “It is imperative that the parties consult with a qualified mortgage professional prior to making any lasting decisions about who will own the marital home after the divorce is finalized.”
If you have children, keeping OR selling the family home can be particularly emotional. Most of my clients are concerned about how a move will affect their children. A common area of worry is the lack of understanding about the implications of who moves out of the family home on custody. To get clarity on that issue, Family Law Attorney Matthew Smurda, Esq. offers some sage advice. He believes that in a divorce, the court weighs the “status quo” very heavily in making a determination of what custody schedule is in the children’s best interests. So, if they find that the children are most comfortable in the family residence and one person has exclusive use of that home, then logically that parent should have primary custody. “Getting control of the family home in a divorce is a game changer,” he says. “If you have possession of the home, your chances of being the primary custodial parent increase substantially.”
Smurda advises his clients to never to surrender ownership of the marital home until there is a stipulation in place regarding custody. “Otherwise, leaving the home can be interpreted as abandoning the family by the Court.” If custody is something that you’re concerned about reach out to Matt or consult with your family law attorney.
In conclusion, if you’re facing a divorce, who owns the marital home really does matter. Whether you keep it or sell it, doing the legwork to understand the impact your home can have on your future can make a big difference for you and your family.
If you need help exploring keeping or selling your marital home, reach out to us. We’re here to help. Email email@example.com or firstname.lastname@example.org for a free consultation today.
***Because of the complexity of the issues that can arise when dividing a house in a divorce, you should always consult with a CPA or financial advisor, as well as an attorney for advice about what is best for your particular situation.