Deciding what happens to the family home is often one of the most difficult issues in a divorce. It affects the future living arrangements of the parties and any minor children. It also has tax ramifications and may affect the possibility of spousal support. If you want to know what to expect regarding the family home, start by learning about California property division laws.
California property division laws
Property division laws depend on the state where the divorce is filed. California is a community property state, so the court assumes that all property obtained by the couple during the marriage is community property. Therefore, California law provides that each of the parties is entitled to an equal share of community property and debts. However, it is not always clear whether something is community property or not. For example, if one spouse acquired the property before the marriage or as an inheritance or gift, the property or any additional funds earned as a direct result of separate property investments may not fall within the definition of community property. However, even when one spouse owns a home before the marriage, if the other spouse financially contributes to the payment of the mortgage, taxes, utilities, or renovations, they may also have a financial interest in the house.
California is a no-fault divorce state, so the divorce is based on irreconcilable differences. The court requires no proof or assertions of fault. In some cases, if one spouse has a permanent legal incapacity to make decisions, as determined by medical testimony, that fact may serve as grounds for the dissolution of the marriage.
Although community property is generally divided equally, some circumstances may alter the division, such as:
- A prenuptial or postnuptial agreement that deals with the division of assets in the event of a divorce
- The couple agrees on a different division of assets
Is your house community property?
Often, the parties purchase the property together during the marriage, using community property assets, and they both have their names on the deed. In these circumstances, it is clear that the house is community property. This community property presumption holds true even if only one person was employed and paid for the house. The parties must have resided in California when they obtained the property.
However, it may not be that straightforward. During a divorce case, the spouse would get to keep a home that is separate property. If the spouses purchased the house before the marriage took place or the house was purchased with separate funds and titled to one person, it may be separate property. However, if the spouse’s name had been added to the title, it becomes part of the community property. California law provides a detailed definition of separate property.
If you and your spouse agree on a settlement, then together, you are able to decide who gets to keep the house and not have the issue decided by California’s community property laws.
Who gets to stay in the house?
For most people, the question of who gets to stay in the house is a pressing issue, especially in the early stages of a divorce proceeding. One or both parties have decided to obtain a divorce, so they generally do not want to continue to live together. The whole situation is highly emotionally charged. Unless the home is clearly separate property, since both own the house, neither spouse can force the other to leave unless there is proof of domestic violence or abuse. The question is also connected to the issue of child custody. Typically, the child wants to stay in their own home if possible.
If the house is a community property, there are various ways to divide the asset. This may be a negotiated part of a divorce settlement agreement, or the judge may rule on the issue and the ruling will be contained in the judgment of divorce. Options include:
Sell the house and divide the profits
Many couples choose to sell the property, divide the proceeds, and each establish a new residence.
One spouse buys the other out
In some cases, one spouse takes full title to the house and buys out the other spouse’s share. This usually involves the spouse buying the house to refinance so that the spouse who is selling has no mortgage obligation. The party purchasing the house should consider the full cost of owning the home. Homeownership costs typically include mortgage payments, property taxes, insurance, maintenance, and utilities.
The buy-out option sounds simple, but it may not be. The property must be appraised to establish its value. In addition, there are potential tax ramifications and factors such as contributions to the home’s value. Sometimes part of the settlement provides that the selling spouse makes mortgage payments as a form of spousal support. This provision also has potential tax implications for both spouses.
A deferred sale
When the parties have minor children, the family home question may be settled by a deferred sale. In this situation, both spouses go on owning the home for a period of time and temporarily delay the sale of the home, after which the spouses will sell the home. Typically, the custodial parent has possession of the home. The concern in this type of arrangement is whether the spouses can maintain house payments, considering their incomes and other obligations. The main purpose of a deferred sale is to ease the effect of the divorce on any minor children. The court may find that a deferred sale is necessary, taking into account various factors, such as:
- the emotional impact on the children
- how long the family has lived there
- the children’s ages
- circumstances regarding schools, child care, and other essential services
- any special modifications required by a disabled family member
- the parental finances
- the parental employment situations
What happens if neither party can afford to keep the home?
As part of a divorce, each party establishes a separate residence, which can be a financial strain. Usually, if spouses have agreed to sell the property, it is because neither one of them want or can afford to buy out the other. If the spouses do not reach an agreement on the issue, the court decides. If the mortgage on the house is in default and in risk of foreclosure, the court may order the sale of the house before the divorce is concluded so that any remaining equity can be distributed.
If you need help with a divorce case, call 619-299-9780 to schedule a free telephone consultation or contact a San Diego family law specialist here.