Home is Where the Heart Was: Divorce and the Family Home (Part 1)

Pending divorce, you may be wondering who will live in the house. How the mortgage will get paid. Where the kids will live. You may also be wondering if the paying spouse will be reimbursed for expenditures related to the residence.

Most clients contemplating a divorce want advice about the family home from the get-go.

So many questions

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 the 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 or the earnings of one spouse. Upon divorce, each spouse is entitled to 50% of the equity in the home. (That said, someone might owe reimbursements for expenses associated with the house after separation but before the divorce or settlement.)

Most family law cases aren’t that simple, though. For example, if you used the money you had prior to marriage (or separate property funds acquired during the marriage) to make a down payment, you may be entitled to reimbursement for that amount.

Another issue that often comes up is when one spouse owned the property prior to marriage and never put the second spouse on the title. If you owned the house prior to the marriage (and then later added your spouse to the title), consider hiring a lawyer to determine what separate property interest (if any) you have.

There are different legal theories the non-titled spouse may try to 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 the title.”

Without a written agreement, you would be hard-pressed to win this argument. But that doesn’t mean the community (and therefore, you) are 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 they established an equity interest for any appreciation in the property. However, at least a claim for money spent may be returned.

“I wasn’t on the title.”

Many clients tell us that they weren’t placed on the title because their credit was terrible and they qualified for a better loan with their spouse on the mortgage only.

Or, they say one party exerted financial control over the other and refused to place their partner on the title.

So, is title presumptive? NO! If the property was purchased during the marriage or domestic partnership, it’s presumptively community (joint) property regardless of how the title is held. The burden shifts to the spouse who claims it is separate property to trace the property to a separate 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 they signed the inter-partner transaction.

If you are curious about property division or have other divorce-related questions, schedule a consultation with Hello Divorce today.

In PART 2, we explore options for division or disposition of the family home at divorce or domestic partnership dissolution.
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