What happens to the family home at divorce or domestic partnership dissolution?
Most clients contemplating a divorce want advice about the family home from the get go.
Pending divorce, who will live in the house? How will the mortgage get paid? Where will the kids live? Will the paying spouse be reimbursed for expenditures relating to the residence?
Once we get past these initial questions, the focus shifts to disposition of the home. Who will keep the house? Should one spouse buy the other out? Am I more likely to get the kids if I keep the house? Will we have to sell? How will the proceeds be divided? What if the home was owned by my spouse prior to marriage and I was later placed on title? What if I was never placed on title, do I have an equity interest? If we can’t agree on division, will the court make us sell? Can we keep the house until the kids turn 18 and then sell? What if I used my inheritance to pay down the mortgage or make improvements to the home?
PART 1: REAL PROPERTY 101, DO I HAVE AN INTEREST IN THE HOUSE?
Basic community property law provides that (with some exceptions) property acquired by either spouse during the marriage and before separation is a joint asset. In the clearest circumstance, your home was purchased during the marriage with joint savings and/or the earnings of one spouse. Upon divorce, each spouse is entitled to 50% of the equity in the home (although there might be some reimbursements owed for expenses associated with the house after separation but before divorce and/or settlement).
Most family law cases aren’t that simple. For example, if you used money you had prior to marriage (or separate property funds acquired during the marriage) to make a down payment, you are entitled to reimbursement for that amount (Family Code Section 2640). Also, if you owned the house prior to the marriage (and then later add your spouse to the title), you should consider hiring an lawyer to determine what separate property interest (if any) you have. Another issue that often comes up is when one spouse owned the property prior to marriage and never put the second spouse on title.
There are different legal theories the non-titled spouse may try and use to establish a financial interest in the home:
“She promised me that if I used my earnings to pay the mortgage down and we stayed together, I’d be placed on title.”
In this circumstance, absent a written agreement, you will be hard pressed to win this argument. But it doesn’t mean the community (and therefore, you) is screwed. The community likely earned an (equity) interest in the property assuming the value increased and either one of you used your earnings or joint funds to pay down the mortgage.
“I used my inheritance to improve our home because my spouse promised to make me a joint owner.”
The non-owning spouse may have a reimbursement claim for monies spent on capital improvements or other household bills. This doesn’t mean s/he’s established an equity interest for any appreciation in the property, but at least a claim for money spent may be returned.
“What if I wasn’t on title?”
Many clients tell us that they weren’t placed on title because their credit was terrible and they qualified for a better loan with their spouse on the mortgage only. Or, one party exerted financial control over the other and refused to place their partner on title. So, is title presumptive? NO! If the property was purchased during the marriage or DP, it’s presumptively community (joint) regardless of how title is held. The burden shifts to the spouse who claims it his separate to trace the the property to a separate property source . The burden can also be overcome by producing a written agreement that assigns the property to one spouse only. But be careful! There’s also a presumption that the disadvantaged spouse was subjected to “undue influence” when s/he signed the interpartner transaction.
If you are curious about property division or have other divorce related questions, schedule a consultation with Hello Divorce today.