For many divorcing couples, the marital home is the single largest asset. That fact alone makes the disposition of the house a central issue in a property settlement agreement. But other factors contribute to the dilemma a Phoenix divorce attorney often hears: “What should we do with the house?”
The first issue is to determine how the house should be characterized; is it a community property or separate property? If it was acquired during the marriage, there is a strong presumption it is community property, but a Phoenix divorce lawyer can explain that presumption can be overcome. Similarly, a house owned by one of the parties before marriage can be changed from a separate property asset to a community one by the actions of spouses, such as both paying the mortgage or increasing the equity through home improvement.
Difficulty in Evaluation
If the house is a community asset, an agreed upon evaluation must be made. Real estate can be difficult to accurately appraise; in fact, the only absolute valuation of property is what it sells for. Consequently, if one party wishes to remain in the home, a value must be assigned. Often, however, as a Phoenix divorce lawyer cautions, people have created emotional attachments to their home and are unrealistic when it comes to valuation.
In many cases, both parents express a preference for the children to continue living in the family home. This is especially true if they are older and near high school graduation; it makes sense to not disrupt this important phase of their lives. However, having one parent retain the family home creates other issues to contend with.
Tax Consequences and Cash Flow
If the house isn’t sold, the spouse that retains the property can try and buy the other’s share. Even if that’s possible, which for many it isn’t, the spouse who is bought out may owe capital gain taxes if he or she makes money on the sale and does not reinvest in a new house within 24 months. The spouse who retains the house will be responsible for the entire overhead associated with the home, which can impact spousal support. Delaying any resolution of the house until sometime after the divorce is final can be complicated by changing real estate values.
Contact a Phoenix Divorce Attorney for Legal Advice
The emotional impact created by a divorce cannot be minimized and must be appropriately dealt with. However, it is important to also realize you are making critical financial and legal decisions that will have long term consequences. Be certain you have all the facts and fully explore your options. Call the Law Offices of Janice M. Palmer, P.C., a Phoenix divorce attorney, at (888) 352-7725.