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Manual > 11 - Property and Debt > Marital Home

Marital Home

It is common for the marital home to be the most substantial marital asset, both in terms of value and emotional significance. This emotional significance is especially significant when the issue becomes whether the children will continue to be able to live in the same home environment.

As divorce, almost by definition, suggests that parties will no longer be living together, this does not necessarily mean that parties need to separate their ownership of the marital home immediately. For example, parties may decide to "play the market" and delay the placement of a home on sale until a better selling period or until a child reaches a certain age, a degree is completed, or simply for an agreed-upon period of time.

If parties decide to continue with co-ownership of the marital home for any significant period of time after the issuance of their decree of dissolution of marriage, it is common for them to continue on as "tenants in common, an undivided one-half interest in each party," as opposed to the marital "tenancy by the entirety," which includes joint ownership and right of survivorship. Sometimes, if only for a certain period of time, even divorcing parties will provide the other party with a survivorship interest in real property. When this is done, the form is known as "joint tenancy with right of survivorship."

In the event of a delayed sale, it is common for divorcing parties to share the net proceeds from the sale either equally or by some designed formula (as a part of their overall property and debt division). When net proceeds are allocated, this should be done with specificity, including consideration of specifically what debts will be paid from gross proceeds, what brokers and closing costs are to be deducted, how property taxes are to be considered, who has responsibility for the payment of the mortgage and property taxes prior to sale, etc. The parties may want to clarify who has maintenance responsibility for the home prior to sale and whether and how major maintenance and/or costs incurred in readying the home for sale are to be considered.

The parties should also pay attention to any capital gains taxation they may incur as a result of the eventual sale of the home. A joint consult with an accountant should be advised whenever a home sale is contemplated either presently or in the future.

If one party gives up any claim to any interest in the marital home as part of a divorce, this is typically done by the transfer of a "bargain and sale deed" or "quitclaim deed," without any specific warranty. Note, however, that the fact that the marital real property is transferred to one party does not release the other party from potential responsibility for failure to pay the mortgage or property taxes. Just because two people choose to get divorced, they cannot release one of them from debt responsibility when the loan was extended based upon the parties' joint creditworthiness. Divorce itself cannot lessen the position of any third party creditor.

Given this unavoidable risk, some divorcing parties will agree to refinance the marital home in one party's name only, if this can reasonably be done. The parties may even share any costs associated with such refinancing.

One challenging issue for consideration is whether broker's fees that will be incurred by one party "someday" should be deducted from the value given to the marital home. In most states, sale costs and tax implications will be considered by a court, if a sale of the home is actively planned. A court will do its best to determine costs associated with sale and tax implications and adjust the parties' overall property and debt division accordingly. Courts do not, however, generally consider sales costs and tax implications if the sale of the marital home is only contemplated by a party (but not planned) and fully subject to control of that individual party. Under these circumstances, the court views the quantification of such costs as speculative and the court is not prepared to determine such amounts unless that can be done with specificity.

Special attention should be paid to the "homestead exemption." Under this provision of the tax code, an individual or married couple is entitled to deduct the first $125,000 of taxable gain upon the sale of their marital home if that sale takes place after age 55. By purchasing a sequence of homes of equal or greater value, many married couples are able to effectively defer and then avoid taxation on the gain upon the sale of their home. In the event the parties' plan for the marital home involves a sale prior to age 55 and one party will incur tax liability, the mediator will need to work with the parties to determine whether such taxable gain should be acknowledged and dealt with in the mediation.

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