Even in the politest divorce—of which there are relatively few—the decision as to whether to keep or sell the marital home can bring up a storm of emotions resulting in power struggles, conflict and endless negotiations. Memories of purchasing the home when things were probably good between the spouses is the reason some want to keep the marital home, while others see it as a practicality, in that it helps keep the children’s lives as secure and stable as possible during this difficult time.
Sentimental reasons are actually the most common reasons for wanting to keep the marital home—there’s that wall in the kitchen where you measured the children to see how tall they’d grown, the back patio where you had many family barbecues, and the front sidewalk where the kids learned to ride their bicycles. Still others, may have only bad memories of the marital home as a result of the way the marriage ended, therefore may want to sell as soon as possible, and move on with their life.
Since the marital home is often the largest marital asset, and because the decision of whether to keep or sell the home involves significant financial, tax and emotional consequences, this is a decision which truly requires careful thought. It could come as a surprise to you, that keeping the marital home may not be as desirable as you think it is. Answer the questions below, then assess those answers with your divorce attorney in order to determine whether keeping the marital home in your situation is really a beneficial move.
- How big is the marital home? Do you still have children at home—and will you have primary custody of those children—to fill up the house, or will it really be too big for you, particularly if there are no children left at home?
- How much is owed on the home? Can you afford the monthly mortgage payments as well as insurance and taxes?
- Can you afford to maintain the home—i.e., if something breaks, or if the roof needs replacing, can you afford to have those repairs done?
- Do you have the time and the skills for normal maintenance tasks?
- Would you be able to refinance the marital home, placing it in your name only (is your credit good enough to refinance on your own, understanding that we are not in the same economic climate that we were a decade ago.)?
- Is there enough cash available in the marital assets to buy out your spouse’s portion of the marital home?
- If there is not enough cash available, is there another marital asset you could trade for equity in the marital home?
- If you decide to move, have you calculated all moving expenses, including putting down deposits on a rental, as well as renting a moving van, etc.
Even if you have positive answers to all the questions above, ask yourself whether keeping the marital home is a wise investment. There are many people who divorced in 2005, 2006 or 2007 who felt retaining a home with equity in exchange for a retirement or brokerage account would be a good, long-term financial strategy. When the economy crashed, those same people found themselves with upside down mortgages, and no other financial assets to fall back on.
If your mortgage is already upside down, then the decision could rest on which spouse has the necessary income to continue making the monthly mortgage payments. If neither spouse can afford to sell the house for less than it is worth, the spouse who is best able to afford the mortgage, insurance and taxes might stay in the house, hoping for a better housing market. After you have answered the questions above, do the following:
- Consider all your options carefully, making a “pro” and “con” list, if necessary. Typically, you and your spouse could sell the house and divide the profits, one of you could buy the other out, or you could maintain joint ownership until the children are grown or the housing market improves. Some couples even engage in sharing the home, allowing the children to stay in the home full-time, while the parents come and go when it is their custodial day.
- Request a copy of your title report through your title company. Even if you are fairly sure you know how your home is titled, some spouses have been shocked to find out they were wrong. Even if both spouse’s names are on the title, you need to find out whether you are listed as:
- Joint tenants with right of survivorship;
- Tenancy in common;
- Community property with survivorship;
- Partnership, or
- Sole and separate property.
Pulling your title can also tell you whether there are any liens against the property.
- Make sure you know exactly what the marital home is worth. You can do this either by having a knowledgeable real estate agent give you an estimate, you can go on Zillow or other real estate websites and get an estimate of your home’s value, or you can have a professional appraisal done. While having an appraisal done will cost the most, it is probably worth the cost as you will then know what the house is worth as opposed to only having an approximate idea.
- Know how much equity you have in your home. For example, if your home is appraised at $650,000, and you owe $200,000, then you have $450,000 in equity in the home. While it would seem you would simply divide that number in half, giving each partner $225,000 in equity in the marital home, in fact, it is much more complex. There are tax implications to consider, plus a judge may decide the spouse who worked outside the home has more equity in the home than the spouse who did not work outside the home.
- Determine exactly how much it will cost to keep the marital home. Include your mortgage payments, maintenance and upkeep, home insurance, utilities and property taxes. In the case of a very large home, just the utilities alone could be considerably higher than you would pay in a smaller home or an apartment.
- Consider the current housing market as well as your specific family situations. If your children are in school, and the decision is to sell the home, you might want to stay until the school year is over, simply to give the children some consistency in a time full of varying levels of chaos. Depending on your situation, taking yourself or your spouse off the title to the marital home could affect capital gains deductions, therefore it is wise to consult a CPA to help determine the best timeline for making changes.
Statute Regarding Florida Sale of Marital Home During the Dissolution of Marriage
Florida statute §61.077—Determination of entitlement to setoffs or credits upon sale of marital home, discusses splitting the marital home. Some couples have lived in their home for twenty, thirty, forty years, or even longer, making the emotional ties they have to the home very strong. It is important to understand, however, that the marital home could potentially be more of a liability, both financially and emotionally, than you might think.
Couples who are unable to reach an agreement regarding the marital home may be court-ordered to sell—in this case the marital home is listed, and any proceeds are held until the divorce agreement is in place. In rarer cases, you and your spouse may choose to keep the residence as an investment, renting it out until the market improves. While this choice may make sound financial sense, it does tie you and your spouse together until the house sells, which can result in additional disagreements between the two of you—particularly if your divorce has been contentious on other matters.
A mortgage which is clearly upside-down leaves you with fewer options, since selling your home immediately may simply be out of the question. Whatever you and your spouse desire as far as your marital home is concerned, under Florida statute, neither spouse is entitled to gain from the sale of the marital home unless there is a settlement agreement or final judgment firmly in place which clearly sets out the dispensation of any credit or setoffs from the home. In the absence of such an agreement, the judge in your divorce case will consider the following factors when determining an entitlement to credit or setoffs once the home is sold:
- Which spouse has been awarded possession of the home;
- Whether spousal support was awarded to the spouse who will remain in the marital home;
- Whether awarded spousal support is supposed to cover property taxes, upkeep, and mortgage on the home;
- Whether the spouse awarded the marital home is also awarded child support, and if that child support is intended to cover mortgage, repairs and property taxes on the home;
- The value of the home to both spouses;
- How the loss of the marital home affects the spouse who is not awarded the home;
- Which spouse will gain tax benefits from mortgage payments and property taxes;
- Which spouse will experience capital gains from the eventual sale of the home, and
- Any factor considered reasonable by the judge to determine whether one spouse is entitled to a credit or setoff from the sale of the home.
Special Advice for Women Regarding the Marital Home
While certainly not always true, women tend to have fewer financial resources than men, therefore must be extra-careful to ensure they receive an equitable settlement during the divorce. Far too often, a man may cut off all funds to his wife as a means of “punishing” her, particularly if the wife is the one asking for the divorce. Women who have spent years taking care of the household and raising children may be at a particular disadvantage as they consider re-entering the workforce. While accepting the first settlement offer could be tempting, simply to be able to get on with your life, it is important to take your time and consider each decision, as these decisions will affect you for a long time to come. If you are a woman contemplating divorce and you want to make sure the division of assets, including the marital home, is fair, then consider doing the following:
- Keep a comprehensive journal of every event or fact which could have any effect, no matter how small, on your divorce
- While you may want to curl up in a ball and stay there until the divorce is over, it is important that you stay organized. Make a list of things which must be done, then prioritize your list and do your best to stay on top of it.
- Cut back on expenses; if you have credit card debt or student loans in your name, pay these up ahead to the extent possible before the divorce. Of course, if you are the one hit with an unexpected divorce, this may be much more difficult to accomplish. If your spouse is refusing to support you and your children, your attorney can ask the court for a temporary order of support.
- While this may be one of the most difficult tasks, try to avoid needless conflict with your spouse. If you have children together, you will be in one another’s lives for many years after the divorce, and in order to even obtain a divorce you will eventually need his signature on the final divorce settlement papers. Try to control only those things which are truly within your control.
- Organize your financial documents and ensure you have copies of every important document you and your husband have. This includes bank statements, life insurance policies, pension plan information, mortgage information, credit card statements, utility bills, titles to property, tax returns and any other document which sometimes mysteriously “disappears” during a contentious divorce.
- Educate yourself regarding the process of a Florida divorce. This education will ensure you make the best decisions—and don’t make bad decisions—which could come back to haunt you for many years.
- Call a Ayo and Iken attorney and then tell him or her everything. The only way your divorce attorney can truly help you is if they have all the necessary information.
The average divorced woman suffers a staggering 73 percent drop in her standard of living within the first year after their divorce. Seven years after the divorce, those same women still have an 18 percent lower standard of living. In stark contrast, the average divorced man experiences a 42 percent increase in his standard of living, even after making spousal support payments and/or child support payments. Nearly half of all women say their divorce created a financial crisis, yet conversely about two-thirds of women say this financial crisis helped them realize the importance of being informed about their finances.
Whether you are male or female, and whether you want to keep your marital home, sell the home, or never see the home again, speaking to a knowledgeable Ayo and Iken Florida divorce attorney can help you make the best decision for your future.