What happens to the house following a divorce?

What happens to the house following a divorce?

The home that a married couple purchased and lived in during married life is usually the most significant asset, both financially and emotionally, that a couple must address during a divorce.  How do you decide what to do with the house?  There are many factors and issues that each spouse must evaluate before deciding what will happen with the family home.

Community or Separate Property

The question of who owns the home must be answered before determining what happens with the house.  In California, assets acquired during marriage are considered community property and will be divided equally in a divorce.  If a spouse bought the home prior to the marriage, then the home is presumed to be that spouse’s separate property.  However, the situation can become complicated if the other spouse makes mortgage payments for several years during a longstanding marriage.  The most straightforward situation is when the couple purchased the home during marriage with community property funds and both are on the title.

Options and Factors to Consider

If the home is community property, then there are three main options for what to do with the home:  maintain the current ownership/title; sell the home and split the proceeds; or “buy out” the other spouse.  Because the emotional and financial implications often hinder a couple’s ability to reach an equitable decision regarding the home, an already difficult decision becomes the most contentious aspect of the divorce.  Nonetheless, the home, just like other marital assets, can be part of the spouses’ agreed-upon separation of property and debts.

The financial reality and tax consequences may ultimately lead to a decision that neither spouse prefers.  Because emotional, practical and financial factors all impact the decision, both spouses must understand all the options and the implications before deciding what to do with the house. If the couple is not able to resolve the disposition of the home, then the judge will decide.     

Do we have to sell the house?

No.  If one spouse wants to remain in the house, then there are options.  When the couple has significant assets, the house may be awarded to one spouse and other assets of equal value to the other spouse.  Or, one spouse can “buy-out” the equity of the other spouse, basically purchasing the home from the other.

Who pays the mortgage?

Who pays the mortgage depends upon what the couple decides to do with the house.  If one spouse would like to remain in the home, then that spouse can assume the mortgage (if the bank allows) and the other spouse will be removed from the mortgage.  Another option is for the spouse remaining in the home to refinance the home in his name only.

If assuming the mortgage and refinancing are not options and the spouse living in the home cannot afford the payments, then the other spouse may agree to directly pay the mortgage, especially if there are children involved.   In some instances, if the spouse does not have sufficient income to make the payments, then the amount of the mortgage payment might be added to the alimony or child support payment.  These options can be problematic because if the mortgage payment is not made, creditors can attempt to collect from either party.

Is a quitclaim deed a good option for removing one spouse from title?

If one spouse wants to be removed from title, then a quitclaim deed can be utilized.  However, if both spouses are on the mortgage, a quitclaim deed does not remove that spouse from the mortgage and the bank can still attempt to collect from both spouses.

Is the custodial parent always awarded the house?

When deciding what happens with the family home, a court will always consider the best interests of the children.  However, there is not a presumption that the spouse with physical custody of the children retains the house.   The most practical decision is to give the home to the custodial parent, but the financial implications will be considered to be sure that the mortgage can be paid and that the other spouse is treated equitably.

In certain financial circumstances, the best option is to sell the home.  But, if that is not in the best interests of the children, the judge may determine—after looking at all factors–that a deferred sale is feasible.  In that case, the custodial parent and children may remain in the home for a period of time and defer the sale until a future date.

What if neither spouse can afford the mortgage payments after divorce?

If the couple cannot afford to maintain the mortgage following the divorce, then the home may have to be sold.  Hopefully, the home is worth more than what is owed on the mortgage.  If yes, then the couple can split the proceeds and each spouse proceed with obtaining replacement housing.  If not, then the couple has a difficult decision to make.

If the couple can afford to make-up the difference in what is owed on the mortgage, then they can sell the home, pay-off the mortgage balance and move on with alternative housing.  However, if they cannot afford to make-up the difference, then they will need to consider a short sale, or postponing the sale for a particular period of time.  Postponing the sale can be problematic if the couple cannot agree on who should make the mortgage payments or if the payments are not made.

Are there tax consequences with one spouse paying the mortgage?

Yes, there may be an issue with who may claim the mortgage interest tax deduction if one spouse takes over the mortgage, assumes the mortgage, or purchases the other spouse’s equity in the home.

What happens with the house after separation but before the divorce is finalized?

The period of time between the couple’s decision to separate and the final divorce order can cause complications with many financial aspects of a divorce, including the house and the mortgage payments.  Because this period of time can last several years, one spouse may want to sell the home while the other wants to keep it.  During this time, the court will freeze any such activity relative to the home, meaning neither spouse can sell or refinance without the other spouse’s and court approval.

It is important to note that just because one spouse is staying in the home during this period, it does not necessarily mean the court will award the home to that spouse.

Mike's Top FAQs About Divorce

How is a military pension divided in a divorce?

How is a military pension divided in a divorce?

Divorce proceedings are conducted by state courts and they can divide military pensions. The federal Uniformed Services Former Spouses’ Protection Act (USFSPA) allows (but does not mandate) state courts divide military retirement pensions upon divorce, legal separation or annulment.

How much of the pension gets divided?

The share of a pension to the non-military spouse could be as low as nothing or as high as half.

  • The non-military spouse might get 50 percent of the pension only if the marriage lasted the service member’s entire military career.
  • If the marriage lasted for part of the military career, the pension division will probably be prorated to reflect the time the spouse served in the military.

How an ex-spouse gets paid?

The USFSPA has a 10/10 Rule which states that if the couple was married for ten or more years while a spouse performed at least ten years of service, the government will make payments directly to the ex-spouse.

If this rule doesn’t apply, but the non-military spouse is awarded a portion of the pension payments, the service member gets paid the entire amount but will be obligated to the correct portion to the ex-spouse.

Another way to get paid is to have an actuary evaluate the military spouse’s pension to determine its current cash value. The military spouse would then give the other spouse an equivalent value in cash or non-marital property, leaving the military spouse with exclusive rights to the pension.

Posted in: Divorce, Family Law, Military Divorce, Property Division

How are disability payments to a military veteran handled in a divorce proceeding?

How are disability payments to a military veteran handled in a divorce proceeding?

The federal Uniformed Services Former Spouses Protection Act (the “USFSPA”) permits divorce courts to award ex-spouses of service members part of “disposable retired pay” (the retired pay available (after necessary deductions) based on salary and years of service). How that’s divided is decided by an agreement between the parties or by the judge.

  • Under the USFSPA, military disability pay is not “disposable retired pay” and is not subject to division in divorce.
  • If a service member waives retired pay in order to get disability pay, an ex-spouse can lose out on hundreds or thousands of dollars which they might have received.

There are two kinds of military disability pay and both are excluded from the USFSPA definition of disposable retired pay:

  1. Military Disability Retired Pay: This is for those are disabled such that they can’t perform their military duties.
  2. VA Disability Compensation: This type of compensation from the Department of Veteran’s Affairs (VA) covers injuries or disabilities that occurred while on active duty, or which were made worse by active service, including service related (not necessarily combat related) mental or physical injuries.

To get these VA benefits, a service member must waive a certain amount of retired pay. If this is done, the amount waived is subtracted from the amount available to the former spouse.

Spouses can have some protections or take steps to get the maximum payments:

  1. If there is a separation or property agreement, it should include a provision stating if the service member waives any retired pay for disability pay, the service member would make a monthly payment to the non-military spouse in an amount that makes up for the lost retired pay.
  2. If there is no such agreement and the divorce issues are being litigated, the judge can be asked to retain jurisdiction to order the military member to pay spousal support in the future, or to modify an existing alimony order based on any change in the parties’ circumstances. If retired pay is reduced because of disability pay, the non-military ex-spouse could request the judge to order the military member to pay spousal support (or increase it) to make up for the retired pay that’s been lost.

 

Posted in: Divorce, Family Law, Military Divorce

What is the Service members Civil Relief Act (SCRA) in a Military Divorce?

What is the Service members Civil Relief Act (SCRA) in a Military Divorce?

The SCRA was enacted in order to help protect service member’s rights if and when they are called to active duty. It protects regular service branch members, in conjunction with members of the Coast Guard serving on active duty in support of the armed forces, members of the National Guard when serving in an active duty status under federal orders, and Reserve members who are called to active duty.

The SCRA affords the right for any court proceedings to be put on hold, or provided a “stay” to postpone any administrative activity if a member’s active duty has an effect on their ability to proceed in the case.  This specifically applies to child custody issues as well and a stay of court and administrative proceedings would be afforded in order to protect the non-present spouse’s parental rights. The SCRA would be incredibly helpful if a spouse were to attempt to change the status of child custody while the service member is deployed.

A ninety-day stay is automatically granted when a service member requests this protection in writing. However, any further delay is decided at the discretion of the judge, hearing officer or magistrate that is assigned to the matter. This protection is not afforded nor does it protect a member’s invocation right for any criminal court proceedings.

There are also many individual state laws related to military child custody. Through the USA4 Military Families initiative, the DoD is partnering with states in order to further support military families. Specifically USA4 Military Families is striving to educate policymakers and ensure deployment separation does not determine child custody decisions.

Posted in: Divorce, Family Law, Military Divorce

What is a Family Care Plan for Child Custody in a Military Divorce?

What is a Family Care Plan for Child Custody in a Military Divorce?

As with normal civilians, military couples are presented with child custody issues if they are seeking dissolution of marriage. Members of the military are aware that active duty often requires time away from home due to deployments, training or frequent relocations. These factors may present custody issues, however there are ways to prevent or relieve some of the stresses that can evolve in a military divorce regarding child custody matters.

A Family Care Plan is highly recommended and sometimes required in order to clarify necessary details about the care of your child if a service member is called to active duty or deployed at no notice. Although most couples aren’t required to establish a family care plan, if you are or become a single parent due to death of spouse, separation/divorce, a service member can remain active but must meet the family care requirements of DOD – essentially requiring such members to have a “family care plan.”

A Family Care Plan is a set of documents describing who will care of your child during specific instances or if a military member is away on deployment or training. When it comes to a Family Care Plan there are some slight differences depending on the service, however most have three basic requirements: short-term care providers, long-term care providers, and care provision details. These support details include naming who will care for the child, financial details, medical specifications, and logistical considerations pertaining to food, housing, transportation, etc. These named care providers must be a non-military person, who agrees, in writing to accept the care of the member’s child or children. This person will also sign the Family Care Plan, indicating they consent and understand the responsibilities they are being entrusted with.

Posted in: Divorce, Family Law, Military Divorce

Can parents create their own agreement for child support?

Can parents create their own agreement for child support?

Yes, parents can stipulate their own agreement regarding child support, but it must be approved by the court. In order for the court to consider reviewing the agreement, it must meet the following guidelines:

  1. There must already be an open court case between the parents.
  2. The agreement must contain the following information:
    1. Each parent is fully aware of his/her child support rights.
    2. Each parent is aware of what the guideline child support amount would be.
    3. Neither parent is feeling pressured or forced to agree on the stated amount.
    4. Neither parent is receiving public assistance or has applied for public assistance.
    5. Both parents think that the agreed upon amount is in the best interest of the child.

After you have reached an agreement with the other parent and have created a stipulation consistent with these guidelines, you will both need to sign the document. If you do not have attorneys, your signatures will need to be notarized. You can then submit the stipulation for the court’s review. If you have a court date scheduled, you can bring the stipulation with you to the hearing for the judge’s review and signature, or you can go to the courthouse and ask to speak with a family law clerk to get it approved and signed.

After you have received the judge’s signature, you’ll need to file the original with the court clerk, and serve a file-stamped copy of the order on the other parent (or their attorney, if they have one.)

Posted in: Child Support, Family Law