WHO GETS THE HOUSE?
Divorce. It’s about a lot of things. A divorce can involve every aspect of your life. From your children to your retirement assets to your car to your credit card bills and that timeshare in Florida you just plain wish you’d never bought, it’s all on the line if you’re getting divorced in the State of New Jersey. Even your house, provided that it’s considered a “marital asset” by the court. But how does the court decide what happens to these debts and assets, and who gets the house? And how should you know what assets you might wish to keep, perhaps even fight for, and which ones you may wish to give to your soon-to-be former spouse without a fight? Should you always fight to keep your house in a divorce or does it sometimes, as crazy as it might sound, make more financial sense to let the home go to your spouse or to simply sell it and split the proceeds?
Let’s take a step back for a second and start from the beginning. Because that is where the court will always, generally speaking, start its own analysis. If you cannot decide between yourselves and with the help of your attorney who is going to keep what, then it will fall upon the court at trial to do so. In order to divide the debts and assets of you and your spouse, the court first has to be satisfied that something is actually a marital asset or debt and thus subject to the court’s power to award it to one or both of the divorcing parties. When it comes to sorting out what is and what is not a marital asset or debt, and thus subject to equitable distribution in a divorce, the State of New Jersey generally holds that all items of personalty (things like your watch or your car), realty (your primary residence and any other land or properties you may own), money (your bank accounts and retirement assets as well as any other money-based investments or assets), and all debts (credit cards, mortgage, home equity line of credit, loans payable) which were acquired from the date of the marriage to the date of the filing of a complaint for divorce are marital in nature. Anything considered marital is going to, generally speaking, be subject to what we call “equitable distribution.” As you might imagine, the definition of “equitable” is a fairly fluid thing and one which may be used for your benefit or detriment when it comes to sorting out these issues. Who should owe for the credit card debt? Who should get the house? What is going to be considered equitable by the court? For the purposes of this article, you can think of “equitable” as meaning “fair.” The court will try to do what it thinks is fair, under all of the circumstances of which it is aware. The starting position of the court on many items may be to simply split a given asset or debt right down the middle, barring proof to the contrary that one party or the other should receive more of a given asset or less of a given debt. Some items may be split in favor of one party or the other in order to compensate them for a loss somewhere else in the process. Other than retirement assets (a subject for another article, to be sure), the largest asset family law attorneys handle is generally the marital home.
Which brings us back to our initial question: Should you always be the one who fights to keep the family home, the marital residence? Surprisingly, the answer might not be a resounding “yes.” It’s understandable that many clients wish to fight for the right to keep the marital home. People put time, effort, money, and their heart into making a house a home. If you have children, it may be very convenient to keep them in the home they grew up in, to make sure they can finish their high school years with the friends they have known their entire life, with as little disruption to them as possible. This is frequently the number one reason a client wants to stay in the home. The other is that the family home may be the largest asset owned by the parties to a divorce. It may represent their largest reserve of finance and security and for one party or both it may represent their retirement funds in total. For this reason, many people fight tooth and nail “to get the house.” But…what are you really getting? Are you getting an asset? Or an albatross to hang around your neck in the years to come?
In many cases, by the time you “buy out” the other party—compensating them for the equity in the home to which they are entitled, you have maxed out the available equity in the home borrowing the money to “pay off” your spouse and now are facing the task of paying down the entirety of the mortgage AGAIN. In addition, unless your home is brand new, it will at some point need a roof, it will need the lawn mowed all spring and summer, it may need painting, carpet, plumbing, electrical work. It will need to be insured and you will need to pay the monthly bills like electric and gas for so long as you live there. These costs continue for as long as you live in the home. And of course there will be taxes, even after you pay it off. So what you may really have fought for, depending upon your individual circumstances, is a great big pile of debt from which you will never get out from under. I have literally seen people—against all advice offered to them by their counsel—insist on “buying out” their spouse in a divorce by trading away their interest in his or her retirement assets in exchange for the marital residence. I cannot stress enough how frequently this is an enormous mistake for the person in question. Years or even months later they discover the costs of the home are oppressive and they end up selling it, making far less in the process than they would have received from their former spouse’s retirement assets when you factor in all of the money they put into the home just for monthly carrying costs. Even worse, they may fall behind on the mortgage and end up losing it to foreclosure or filing a bankruptcy to discharge the debt, losing the house and getting nothing at all from it, after they also walked away from their former spouse’s retirement assets at the time of the divorce.
The point here is not to say that no one should ever fight to keep the house in a divorce. There may be many valid reasons for doing so and no two divorces are alike. The point here is to show that because no two divorces are identical, each divorce requires that you and your attorney sit down and be realistic about what you might “want,” what you might be “entitled to,” and what you might actually “need” in the years to come. A good divorce attorney will be honest with you. They will not tell you what you want to hear or lead you down a path gilded with your hard-earned dollars to a road of future financial disaster just because there was a fight to be had. A quality divorce attorney will sit with you and not just ask “what” you want, but also ask “why” you want it. A quality divorce attorney will not be afraid to tell you when it’s worth fighting for that house that you put so much time, money, effort, and heart into…and when it makes sense for you to walk away.
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The above is not specific legal advice nor does it create a lawyer-client relationship. Do not rely upon it without consulting an attorney to see how the information presented fits your unique circumstances.