When a married couple divorces, they must divide all their marital assets and debts in accordance with state law. For some forms of property, this is a relatively straightforward process. For instance, a checking account can be closed and the money divided between the parties in a way that meets state guidelines of fairness. For other types of property, the process is much more complicated.
One problem many divorcing people face is the question of what to do about their home. If they own the home together and decide to sell it, they can divide the proceeds. Things are trickier if one of them owned the home before the marriage, or if one one of them wants to remain in the home after the divorce.
Separate and marital property
The first big requirement of the property division process is for both spouses to list all their assets and debts. They must then divide any separate property from the marital property. They must then divide the marital property between them.
Separate property typically includes assets the parties owned before the marriage. It can also include a few specialized types of property acquired during the marriage. However, even property that was owned in one person’s name can become mingled with the marital property.
One should not assume that because the deed to the house is in one spouse’s name, that spouse own 100% of the value of the home.
Let’s say Alex buys a home for $200,000 and lives in it for two years before he marries Barbara. They live in the home for another 10 years before they decide to divorce. They then sell the home for $800,000, making a nice profit from Alex’s original investment. Still, a court would say this profit was not all Alex’s doing. For 10 years, Barbara lived in the home and contributed to its maintenance and improvements. The increased value of the home became part of the marital property. In the interest of fairness, she should get some of that value in the property division.
Staying in the home
In some cases, one spouse chooses to remain in the home after the divorce. This means, of course, that the spouses can’t sell the home and divide the proceeds, and they must find another way to divide the value of the home.
A common way of doing this is to hire real estate experts to determine the market value of the home. They do this by inspecting the home and comparing it to similar properties in the area. Once the spouses have a value, they enter that dollar amount into the marital property. Next, they negotiate a way for the remaining spouse to buy out the other’s share of the value in the home.
For many divorcing couples, the home represents the single largest asset in the marital property. Negotiating a way to divide its value takes patience, skill, determination and the help of a professional.