For many families, the primary residence is usually one of the most significant assets, and for many divorcing couples, their primary source of property to be split in a just and proper manner is the residence. Unfortunately, this can be a difficult and emotional experience. It is essential to work together with your Collaborative Team, including your attorneys, financial planner, and Divorce Coach, to determine the best way to work together to decide what to do with the house.
Assuming that both spouses contributed to the house's acquisition, here are three suggestions to split the asset. First, you and your spouse can agree to sell the house and distribute the profits after paying off the mortgage. As with any home sale, the parties should talk with a financial neutral to discuss any tax ramifications associated with the home sale. One of the benefits of this option is that it could help pay down other debts. Your Collaboratively trained financial neutral can help you determine whether this is a viable option for your particular situation.
The second option is for one spouse to keep the house and buy out the other. The benefit of this option is that it provides flexibility. For example, one spouse could agree to take on all of the debt in exchange for no equity distribution. Or, the client could agree that the spouse keeping the house could pay the other for a fair and equitable share of the debt and equity in the home. There is a range of flexibility with this option. The clients should work closely with their Collaborative Team to discuss possibilities if one spouse chooses to keep the house.
Either of these two options requires that the clients carefully ensure that only the person who keeps the house stays on the deed and is required to pay the mortgage. Also, the clients should work closely with their team to ensure that everyone agrees about who is selling the house, who is buying the house, who is assessing the value, who will choose the realtor, how the realtor will be paid, who the title agent will be, and that all the paperwork is completed and filed promptly. It is essential to be specific in these agreements.
A third option that some families consider is "nesting." Most divorces require two residences, one for each spouse. However, if children are involved, some families choose to ensure that they remain in the family residence. Under the nesting concept, the children stay in the family home and the parents' transition between the two residences. The purpose is to maintain stability for the children – especially young children. However, the parents need to be aware that they will be sharing a residence with their former spouse – except that they will not be living together. This situation requires a great deal of flexibility by the parents. And, it requires that the parents work together to create a structured schedule for the children. Financially, the clients need to be prepared to pay for two residences in exchange for family stability.
These are just three options and does not represent the universe of possibilities. As with all major decisions to be made during the divorce, it is essential for a divorcing couple to work closely with their Collaborative Divorce team, including their attorneys, their financial neutral, and their divorce coach, to identify a solution that will work for their family when considering how to address the family home during the divorce process.