The house is often one of the most controversial issues in a divorce, second only to concerns about child-care and custody. The house represents more than just a place to live, or a simple asset. It is the family home; a symbol of what was. Understandably, the decision to keep or sell the family residence can be very emotional, especially when children are involved.
Without careful planning the marital home, often sought-after for sentimental reasons during the divorce, can later become a liability. But with a little bit of foresight and by answering some difficult questions, I can help you decide if you really want the house in the divorce: whether you should try to keep the house, or sell it and split the assets.
How long will you live there?
When children are involved, it may make sense for one parent to keep the marital-house to reduce emotional stress. Other times, a divorcing spouse may wish to keep the house for sentimental reasons. For example, it may be the dream house you always wanted; you may have put a lot work into it; or it might hold many great memories. You might also plan to keep the house forever, in which case asking for it in the divorce makes sense. But consider - how old are your children? Will it still make sense to live there after the kids are grown and gone? And can you afford it?
How much will it cost to keep the house?
A house can be expensive - and sometimes difficult - to maintain. Especially when you are shifting from being a 2-income household to having to pay all of those bills yourself. Also, you'll probably need to refinance to buy out you soon-to-be ex's share and transfer ownership so your former-spouse is no longer on the mortgage.
If you want the house in the divorce, you'll need to consider the cost of regular upkeep on the house, on a single income. Also, what about any deferred maintenance issues that may not have been addressed as your marriage deteriorated? You'll need to consider these costs as you think about how much the house is worth, and how much you're willing to sacrifice in order to keep it.
What will you have to sacrifice to keep your central-Florida home?
You may be tempted to trade retirement assets in exchange for the house. But consider how long it will take to come out ahead. Remember, you're already giving up half of your retirement assets in the divorce. Can you afford to give up even more to keep the house? Even if you keep the house for now, you may need to sell the house in the future to fund your retirement. Will the property increase in value between now and then? And if so, will that increase be more than what you gave up in retirement assets to keep it?
What about the tax consequences?
If you and your spouse jointly sell the house before the divorce, you can exclude up to $500,000 in capital gains taxes. Once the divorce is finalized, the entire cost of the sale and the capital gains tax liability will be yours alone. As a newly-single person, you can only exclude up to $250,000 in capital gains taxes for the sale of the house, and will be taxed on any capital gains in excess of that amount. If you had sold the house while you were still married, a $500,000 capital gains exclusion might have saved you from having to pay additional taxes.
Can you work it out with your spouse?
Often, divorcing spouses can agree on how to divide their property. If at all possible, this is the best solution. It will take less time, and cost less money. It is better to maintain some control over how the assets will be divided, rather than turn the decision over to the judge.
Many times, an experienced central-Florida divorce attorney can work with your spouse's lawyer to find a solution, even if you and your spouse could not initially agree on what to do with the house. But if, even after talking to your lawyer and negotiating with your spouse's attorney, you still cannot agree on how to divide the assets, the judge may need to intervene.
Contact The Law Office of Jody L. Fisher For Help
The decision to keep or sell the home during your divorce is a difficult one. But I'm here to help. Based in Leesburg, Florida, my team at The Law Office of Jody L. Fisher proudly serves clients throughout central-Florida. Call (352) 503-4111, or complete our online information form today.