Should I Stay or Should I Go? Divorce and the Marital Residence: Important Factors to Consider for a Financially Savvy Decision
When divorcing, the parties need to decide upon new living arrangements as part of the overall settlement. If you own a home with your spouse, one choice is to sell the home and divide the proceeds after payment of traditional costs. Often, the couple pays off marital debt in the process for a clean slate. This option allows for each party to start fresh in their own new residence.
Another equally common option is for one spouse to buy out the other spouse’s interest in the home and keep the title to the property in his or her name only. Most frequently, I see this option being preferred by spouses who have children they wish to keep in a school system or who have an emotional attachment to the town, neighborhood, or the property itself. Buying out your spouse can be a great option if the facts and finances are on your side. Keep in mind the decision is not as simple as it may seem at first glance. Savvy decision-making means you have spoken with an experienced divorce attorney to ensure you are not placing yourself at risk of financial hardship.
Issues to Consider When Looking to Buy Out Your Spouse’s Interest in the Marital Residence.
When I discuss a marital home buyout with my clients, I emphasize the need to put finances first and emotions second. You need to know, first, how much will you be expected to pay your spouse to take 100% title to the home. This is generally done by having the home appraised and confirming the mortgage(s) currently outstanding. Once you know the amount of the equity, the general rule is you will pay your spouse one-half. This is not always the case, as it depends on your specific facts.
Next, I review the other marital assets and discuss the options available to my client to pay the ex-spouse his or her share. There are many questions to review, such as (1) will my client be required to liquidate brokerage or retirement assets? (2) could there be a negative tax impact to my client? and (3) will my client still have enough money left over to live, or will he or she be “house poor.” Even assuming my client has the funds to buy out the ex-spouse, can he or she qualify to refinance the current mortgage to remove the ex-spouse? The impact of the current high mortgage rates, which have almost doubled in the last year, cannot be underestimated. Having to refinance to a rate that can greatly increase the monthly payment is now one of the toughest hurdles my clients face. Depending on the case, I will try to negotiate an extended period for the refinance to take place, and there are other alternatives. Prior to making a final decision, I have my clients speak with two or more mortgage lenders to have the assurance that they will qualify to refinance.
Once everything is a go, we then discuss both the blessings and the curses that come with home ownership post-divorce. Sole ownership means you will be responsible to pay for all the repairs, maintenance, and increased taxes going forward. It almost always means that when you sell, you pay the full realtor commission, any repairs, and potential capital gains. This means a discussion of your goals and timeline is a crucial last part of this decision-making process. My clients and I review the impact of the buyout on their retirement funding and funding of college accounts, if applicable. In the right situation, a buyout is the best outcome, but it is not the only one. There are many creative ways to approach this issue. Knowing your options and making an informed decision gives you the power.
To Reach the Best Decision for You and Your Family, Arm Yourself with Information from a Trusted, Experienced Family Law Attorney.
Contact me for a virtual case evaluation to discuss your personal concerns and what is most important to you in your divorce. I can be reached by phone at 973.245.9854 or by email at Carole.Hafferty@offitkurman.com. I focus my practice on all aspects of family law, including spousal support, equitable division of assets and liabilities, division of closely held businesses, child support, child custody, relocation, cohabitation, termination/modification of alimony, post-judgment asset division and enforcement. Working alongside our team of professionals, I can help with your family law issues and other legal concerns that may arise as part of your divorce.
ABOUT CAROLE HAFFERTY
Carole A. Hafferty is a Principal in the firm’s Family Law Group. She represents clients in all matters of family law, including spousal support, equitable division of assets and liabilities, division of closely held businesses, child support, child custody, relocation, cohabitation, termination/modification of alimony, post-judgment asset division and enforcement.
ABOUT OFFIT KURMAN
Offit Kurman, one of the fastest-growing, full-service law firms in the United States, serves dynamic businesses, individuals and families. With 19 offices and more than 280 lawyers who counsel clients across more than 30 areas of practice, Offit Kurman helps maximize and protect business value and personal wealth by providing innovative and entrepreneurial counsel that focuses on clients’ business objectives, interests and goals. The firm is distinguished by the quality, breadth and global reach of its legal services and a unique operational structure that encourages a culture of collaboration. For more information, visit www.offitkurman.com.
CALIFORNIA | DELAWARE | MARYLAND | NEW JERSEY | NEW YORK | NORTH CAROLINA | PENNSYLVANIA |SOUTH CAROLINA | VIRGINIA | WASHINGTON, DC