Deciding how to distribute the marital home is often one of the most difficult decisions in a divorce. The home is often the family’s most valuable asset and individuals have an emotional attachment to their home. This article provides an overview of the options available to parties when dividing a house and the many issues to take into consideration. Dividing a house in a divorce involves many complex issues, so you should always consult with a Pasadena attorney for advice about what is best in your situation.
Whose House Is It Really?
The first step is to determine who actually owns the house. This is where things get tricky.
Bought During Marriage - CA Community Property Presumption
In California, there is a presumption that property acquired during the marriage is “community property.” Community property is generally owned by the spouses equally. However, any property acquired through gift or inheritance during the marriage is not community property, but rather that individual’s separate property, which is not subject to division.
For example, if a couple purchases a home together during the marriage using only community property funds and both are on the title, then this home is clearly community property and both spouses share an equal interest.
In some cases, determining ownership of the home is not that simple. For example, a couple buys a home during marriage but the title to the home is in the name of one spouse only. In that situation, the title creates a presumption that the house is the separate property of the spouse whose name is on title. The other spouse would need to overcome this presumption by strong evidence that the intent of the spouses was that the house belonged to both of them.
Owned Before Marriage – Separate Property
If a spouse bought a home before the marriage, that home is generally that spouse’s separate property. However, the other spouse can acquire an interest in the home if during the marriage community funds were used to pay down the principal on the mortgage or to make improvements to the home during the marriage.
What Gets the House?
Community Property Home
If the house is community property, there are several ways it can be divided:
- Sell and Divide Profits – Spouses can agree to sell the home and split the proceeds from the sale. This usually requires a written agreement outlining exactly how the proceeds will be split and instructions to the escrow agent
- Buy Out – One spouse is awarded the home and pays the other spouse their half of the community interest. The spouse awarded the home will need to refinance the home to remove the other spouse from the mortgage.
- Deferred Sale – When there are minor children involved, the parties can agree or the court can order a deferred sale, which is a delayed sale of the home. Both spouses continue to own the home jointly for a set period, usually until the children are old enough to move out or go to college. The custodial parent is given exclusive use and possession of the home during this period. After the deferred period elapses, the parties will need to sell the home.
- Cotenants Agreement – Where there are no minor children and the spouses are older of age, it might be the case that the parties agree to both continue living on the property even after the divorce has been finalized, for sake of convenience and ease. Parties can hire a real estate attorney to draft an agreement that govern their rights and responsibilities as cotenants of the property after their status has officially been returned to single.
Separate Property Home
The home remains the buying spouse’s separate property. However, if during the marriage, community fund were used to pay the mortgage or improvements to the separate property home, then the community acquires an interest in the home. The buying spouse is awarded the home and the other spouse is entitled to reimbursement. The court would need to determine the community interest using a calculation established in the Marriage of Moore, which essentially is determined by the monetary value of the community funds used to pay the mortgage or improvements and proportional share of appreciation of the property. After the total community interest is determined, each spouse is entitled to half of that number. The buying spouse receives the remaining value of the house as their separate property and the remaining amount of the mortgage is assigned to them as their separate debt.
Deciding how to divide the family home can be a very complex issue, especially when there are separate property claims and reimbursement issues to consider. To learn more, contact us today.