Handling Property Division When Paths Diverge

As much as we hate delving into this topic, it’s unfortunately one we’ve encountered several times, so we thought we should share what we know in hopes that it provides at least a modicum of help during such a trying time.

Dividing shared real estate can be one of the most challenging aspects of separating, especially during a divorce – a time already fraught with emotional and legal complexities. A home often carries both sentimental value and financial considerations, but fortunately, there are several ways to address the division of shared property.

Key Approaches to Property Division:

• Equitable Distribution vs. Community Property

• Selling and Splitting Proceeds

• Opting for a Buyout

• Choosing Deferred Sales

  
  

Equitable Distribution vs. Community Property
When courts are tasked with dividing property, state laws dictate whether assets are distributed according to equitable distribution principles or community property rules.

Equitable Distribution
Most states follow the equitable distribution approach, where marital property is divided in a manner deemed fair, though not necessarily equal. Courts may consider factors such as:

• Each spouse’s current income.

• Earning potential of both spouses.

• The value of one spouse staying in the home to raise children.

Community Property Laws
In contrast, a minority of states adhere to community property laws, where marital assets are divided equally (50-50). It’s essential to remember that divorce laws vary by state, as they are governed at the state level, not federally.

Selling and Splitting Proceeds
For properties acquired during the marriage, couples often agree to sell the home and divide the equity evenly. This approach mirrors what courts may order in community property states. Selling and splitting the proceeds can be advantageous, as it:

• Provides funds for down payments on new homes.

• Helps either party relocate.

• Can address outstanding debts.

• Allows both individuals a fresh start.

  
  

When a Buyout Is the Best Option
In some cases, one spouse may choose to buy out the other’s share of the home. This involves refinancing the mortgage under their own name, borrowing enough to pay off the existing loan, and compensating their former partner for their share of the equity. A buyout is often ideal when:

• The home is near the purchasing party’s workplace or family.

• Keeping the home minimizes disruption for children.

• There are strong emotional ties to the property.

• Market conditions are unfavorable for selling.

• The property was recently purchased, with little time to build equity.

However, this option is only viable if the purchasing party can afford the mortgage, property taxes, and maintenance on their own.

Deferred Sales
For some, delaying the sale of the home can be a practical solution. In a deferred sale, both parties agree to retain ownership until more favorable conditions arise. This approach may be beneficial if:

• Moving immediately would cause significant disruption.

• The real estate market is not conducive to selling.

• The couple wants to keep children in a stable environment, potentially until they finish school.

Before choosing a deferred sale, it’s crucial to outline clear responsibilities for mortgage payments, upkeep, and other property-related expenses in the divorce settlement agreement. Consulting an attorney is highly recommended to ensure these terms are legally binding.

Navigating the Emotional Journey
Separating is an emotional and complex process. Enlisting the help of neutral professionals, such as attorneys or financial advisors, can alleviate some of the stress, ensuring that practical matters like property division are handled with fairness and clarity.

If you have more questions or concerns about divorce & real estate, please reach out. We’re always happy to help with advice and guidance.