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Q: I'm just beginning to think about divorce. What usually happens with the marital home? A: If there are children, the parties will often try to let the children stay in the home, typically with their mother, while they are growing up. If there is enough other property, the party who moves out (typically the husband) takes other property, such as stocks, or a share of his pension, to balance his share of the home which he is giving up. Sometimes the spouse who moves out also keeps an ownership interest in the home. This means that when the home is ultimately sold, that spouse will get a share of the proceeds. If there are no children, or the parties can not afford to pay the mortgage on the home after the divorce, the parties typically sell the home. Then they divide the proceeds that are left after the expenses of the sale. Q: Who will get to keep the home? That is, who owns the home now? A: Although these seem like the same question, they really are two different questions. First, we would urge you not to get too hung up on who "owns" the home. Under the law of most states, the couple may negotiate what to do with the home "as if" both are owners of the home. If the couple can't agree, a judge will decide, applying the law of that state as to who "owns" the home. Q: If it comes to a judge deciding, what does my state's law say about who "owns" the home? A: Let's take the typical situation, where the home is purchased during the marriage and mortgage payments are made out of the incomes of one or both spouses. In most states, in that case, the home is considered to be owned 50/50 by the two of you. This is the case even if only one spouse worked and earned money. Q: What if the home was bought before the marriage or with money provided by my parents? A: If the home was bought before the marriage, or with funds provided in part by one spouse's parents, the law is less clear. Also, in theses cases, the law varies more from state to state. Some states will carefully trace the funds used to pay for the home, and award a percentage ownership based on how much was contributed before the marriage, or by a spouse's parents. In other states the date the home was purchased, or the source of the funds matters less. Q: What other issues should I be thinking about? A: Here are some important things to think about:
Q: What kind of planning can I be doing? A: Here are some important planning tips:
Q: Can the Family Law Software Planner help with the Home? A: Yes. the Family Law Software Financial Planner has a major chapter on the home. It considers all the alternative ways of dividing the home. You can ask "what if" about each of them. In exploring the program's many suggestions, you might find a way of dealing with the home that you had not considered. This would let both you and your spouse get what you need, and thus save time, money, and aggravation fighting over this issue. If you are considering selling the marital home, the program will help you figure out how much cash you would walk away with after expenses and taxes if you sold the home. This can be an important input in making this difficult and important decision. The program also walks you through the tax issues, including whether you can exclude the gain on the sale. Because the tax gain on the sale of the home can be quite significant, the tax advice here could save you thousands of dollars in taxes. The program also asks you to imagine where you and your spouse will live after the divorce. If you are going to buy a new home, the program asks for the purchase price and estimates the mortgage you will have to pay. It then shows the effect of that new mortgage (including the deduction of the interest portion) on your bottom line. Thus, the program can help with your "rent or buy" decision after the divorce with a thorough analysis of the before and after tax consequences of each alternative. | |||||||||||||||||||||||||
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