Determining what to do with the family home in a divorce can be a highly emotional decision. However, it's likely one of the largest financial decisions you'll make. Therefore, it's essential not to let sentimentality or the desire to win prevent you from doing what is best for you and your family in the long run.
Who Owns the Home?
First, determine who owns the residence. If you bought it together and both your names are on the deed, it's joint property. If it's in only one person's name, the other spouse may still have some rights to it if he or she contributed to its appreciation in value while you lived there.
In community property states, the home belongs equally to both spouses if it was purchased during the marriage, even if it's in one spouse's name. That's unless you have a prenuptial or postnuptial agreement stating otherwise.
Should You Sell Before or After the Divorce Is Final?
There are tax benefits to selling a home while you're still married. You can exclude up to $500,000 in capital gains taxes if you make a profit and are still filing your taxes as a married couple. Further, you'll have the assets from the home to rent or buy a new place and cover other expenses.
There are many reasons why couples wait until the divorce is final to sell the home. If they have kids, they may not want to disrupt their lives any more than they already have. The spouse who remains in the home after the break-up may not have the time or energy to deal with the daunting tasks of putting a house on the market, finding another one and moving.
If one person stays in the home, you need to work out how the mortgage payments will be divided as well as who will pay the taxes, utilities, maintenance costs and other expenses. Your attorney can help you draft an agreement that details these things. If they can afford it, the spouse who wants to keep the house can buy out the other's share of it.
If you and your spouse can amicably and practically discuss what to do with your home, that's the optimal scenario. However, too often the issue becomes a source of serious (and costly) conflict in a divorce. It's best to talk with your divorce attorney as well as a financial, tax and real estate professional. They can help you cut through the emotions you're likely feeling to reach a decision that will be as financially beneficial as possible as you move on with your new life.
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