Should Divorce of a Spouse Include the House?
For most couples the family home is the largest financial asset they have to divide in their divorce. Unless fully thought through, the decision of what to do with it is fraught with pitfalls for varying reasons. The home may be difficult to value, is not readily converted to cash, costs a substantial amount of money to maintain and has implications of federal and state tax liability. Your family’s emotional attachment to the home may cause you to make a poor decision at the time of the divorce that your family may be haunted by for years to come.
Be fully informed before choosing a direction and get some straight answers.
: What are the tax liabilities should one party keep the home?
· What are possible pitfalls if one party stays and the other is responsible for paying the mortgage
· What are the actual annual costs to maintain the home and has a recent inspection been done?
· Should you keep the home and buyout your soon to be ex-spouse, or vice versa?
· Can either of you really afford to keep it after the divorce?
The answers to these questions and others can help you avoid problems associated with the division of this asset. Historically, the family home is the asset that most often causes controversy both before and after a divorce.
The principal reason for this problem is the timing of the sale of the home and the division of the net proceeds. Both events frequently occur sometime after the divorce. In addition, couples seldom plan as they should for the payment of household maintenance and upkeep during the divorce. For purposes of a divorce, the description of your ownership interest in your home and other real estate can be very complicated with pitfalls for the unwary, so check on the laws in your state.
There are several key factors about your real estate that affect the handling of the asset or the distribution of the net proceeds from the sale of the asset in a divorce.
The factors are:
· identification of the type of real estate and the type of ownership interest you have
· the ownership history of your real estate
· real estate, income and capital gain taxes
· Value and debts, such as loans and tax liens, that are secured by the real estate
· A plan to pay for and maintain the real estate during the divorce and afterward
Most importantly, be sure to seek the guidance from a team of trained professionals. Be sure to choose not just a legal adviser, but a CPA, Financial Planner and Real Estate Professional to assist you in analyzing your options to come up with a plan to meet your goals.