Those going through divorce must list all of their assets. Real estate is often the largest asset any family owns but for many this piece of real estate is their family home. As we all know, a family home is more than just an asset. It also has emotional value. This makes it particularly difficult to determine how to handle when going through a divorce.
The following will provide a two-step approach to help divorcing couples work through this process.
Step #1: The logical approach
The first step is to take a step back and look at the numbers. Take all the potential financial implications into account before coming to a decision. Get an appraisal and take any mortgages or other debt connected to the home into account. Review basic maintenance and upkeep costs as well as tax obligations. Gather all of these figures and check to see if it makes financial sense to keep the home.
After review, some may decide it is best to sell the home to simplify division. You can use a formula to split the proceeds. A sale also reduces future enforcement disputes tied to missed payments or delayed refinancing.
Step #2: The reality
If selling the home, the reality is relatively straightforward. You follow the process noted above and move on.
If keeping the home, the spouse retaining the property generally assumes any mortgage debt, then pays the other spouse for the other spouse’s share of equity. Payment can occur through cash, retirement account transfers via qualified domestic relations order where applicable, or a structured buyout over time.
There is a third option that is gaining in popularity: nesting. This process involves keeping the family home for the children. Either parent will take turns within the family home during their time with the children as outlined within the child custody agreement. Those who choose this option will also need provisions within their divorce agreement to address how to cover the financials that come with this arrangement such as mortgage payments and upkeep expenses.
These are just a few of the discussions to address when dividing property during divorce. It is important to move forward methodically so that you take care of all assets and debts before you finalize your agreement. A structured approach will help to mitigate the risk of any surprises and ease the transition into post-divorce life.