More often than not, a couple’s home represents the primary, if not only, substantial marital asset. Determining who keeps the marital home or what happens to the equity in the property can be one of the most difficult decisions made during a divorce.
After all, your house is a place you’ve put your energy, time, and love into. In times of divorce, it may be your family’s one constant in times of uncertainty. Knowing what happens to this asset during a divorce can help you safeguard it from property division.
“Equitable Share” of the Marital Residence
Before New York became an equitable division state, courts adhered to a “common law property” rule for property division during times of divorce. Essentially, this old system meant that property was divided by whose name was on the title. For example, if only the husband’s name was on the title of the home, he would get the house in a divorce.
That is no longer the case under New York’s current law of equitable distribution. Now, both parties are entitled to an “equitable” share of the marital property. This does not mean that the assets will be divided 50/50, but instead, the courts will look at various factors to determine what is considered a fair or equitable division.
Four Methods Used to Divide the Residence
If the property was acquired during the marriage, and neither party can demonstrate that any separate property was utilized towards the purchase of the property, the value of the property will typically be divided equally between the parties. But how?
There are four common methods in which to divide the value of the marital residence, which can be done by agreement between the parties or order of the court after a hearing:
- Selling the Home. The property is sold on the open market and the net proceeds are divided equally between the parties, after payment of broker’s commission, satisfaction of outstanding mortgages and liens, and payment of usual and customary closing costs.
- Buying the Other Spouse Out. If the house is not sold, it will be appraised to determine value. With this option, one party buys the other party out of the property by paying them one-half of the net equity of the property. This may also require a pay-off or refinance of the existing mortgage to remove the other party’s name from the mortgage.
- Divvying Up Assets of Equal Value. One party keeps the house, and the other party keeps other marital assets (for example, bank accounts, vehicles, retirement assets, a business interest) having a similar net value as the equity in the marital residence so that each party receives assets having comparable values.
- “Exclusive Occupancy” Arrangement. The custodial parent remains in possession of the marital residence until the youngest child completes high school (or until some other triggering event), at which time the house will be placed on the market for sale, and the net proceeds divided between the parties. This arrangement will require the custodial parent to pay all the carrying charges for the property (mortgage, taxes, insurance, utilities, etc.) during the period of exclusive occupancy and until the property is sold. The custodial parent making these payments should be entitled to a credit for payments made during the exclusive occupancy in reduction of the principal mortgage balance at the time the property is sold.
Each of these four methods has its pros and cons, benefit, and pitfalls. Any option you choose to explore more in-depth should be done with experienced legal counsel, as well as tax professionals.
Making the Family Home a Priority In Your Divorce
If you are your spouse are open to negotiating your assets and your marital property, you may be able to use mediation in order to come to a settlement agreement for your divorce. On the other hand, if you are both unable to agree on who gets the marital residence, a judge will have to step in and divide the property according to the state’s equitable distribution laws.
We understand that a house is more than just a building—it’s a safe haven for you and your family. Should you decide that you want to keep your home during a divorce, we will work hard to help you preserve your marital residence. Whether you need a skilled mediator or a tenacious litigator on your side, our compassionate legal team is prepared to craft a personalized legal strategy on your behalf.
For more information on divorce and property division in New York, please Wisselman, Harounian & Associates today! We offer free, no-obligation case reviews.