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Who Gets the Marital Home?

Deciding who will receive the marital home is one of the most difficult issues in a divorce. Generally, the parties’ home is the most valuable asset of the marriage. It is also often the center of family life, especially if there are young children involved. Therefore, the manner in which the marital home is distributed is very important.
 
Information Needed
 
Besides knowing the specific property distribution rules in your jurisdiction, you must obtain accurate information from your client on the marital home, such as a copy of the title document and mortgage; the parties’ mortgage payment history; when the home was acquired; if, when, and by whom any improvements were made; and how the parties have paid for all of the living expenses. Additionally, you will need to know the purchase price and the present fair market value in order to determine the property’s basis. An appraisal is generally required to determine the fair market value.
 
It is also necessary to discuss if your client will be able to afford the home following the divorce, the tax consequences in the form of capital gains if the home must be sold, and other acceptable living arrangements if your client is not awarded the home. Further, the emotional impact on your client, the spouse, and any minor children must be considered in advising your client on how to proceed.
 
For a thorough list if items to obtain from your client, including a sample client questionnaire, see Valuation & Distribution of Marital Property, ch. 12, Possession, Sale and Distribution of the Marital Home (Matthew Bender & Company, Inc.) (available at lexis.com).
 
Methods of Distribution
 
Several options are available for distribution of the marital home. First, one of the spouses may be granted the exclusive possession of the marital home for a specified duration, usually until all of the children have reached a certain age or until the spouse in possession remarries or dies. Then, the home may need to be sold with the proceeds divided between the parties. While one spouse is in possession, either or both spouses may be ordered to pay any remaining mortgage, interest, and maintenance payments on the home. A second option is an order for the sale of the marital home with the proceeds to be divided equally or by a certain percentage to each spouse as part of the overall settlement agreement or court ordered equitable distribution. A third option is for one spouse to be awarded the marital home exclusively. Alternatively, one spouse may be awarded the marital home but be ordered to compensate the other spouse with other marital or separate property, by taking on more of the marital debt, by making payments to the other spouse, or by a cash payment.
 
The distribution method selected will depend entirely on your client’s situation. You must take into account your client’s financial situation, earning potential, emotional state, custody of minor children, and local customs. Generally, if your client will have custody of the minor children, possession of the marital home should be considered, as long as your client can afford to maintain the home. In other situations, selling the home is often a good option. If the home is sold, the parties get their distributive shares quickly, and they do not need to worry about whether their former spouse will disobey the court’s order, requiring contempt charges later on. However, there are tax consequences related to the sale, so consultation with a tax attorney or an accountant is advisable. Alternatively, if the parties are on fairly good terms, possession to one spouse with payments to the other spouse may be worth considering, as well. Property settlement payments do not count as income to the receiving spouse. However, they can be discharged in bankruptcy, so this is not a good option if the spouse in possession has a lot of debt.
 
Closing
 
Distribution of marital property is often a very emotional issue for many divorcing clients. They may want to keep possession of the home for sentimental reasons, even though it will be financially impossible for them to afford to do so. Your job is to carefully discuss all of the advantages and disadvantages of each option with your client, as well as what you believe will happen if the decision is left to the court. Very few divorcing clients are happy with the results, but you can help them to get the best outcome possible for their unique situation.