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Family Home in Divorce Part I
Child Custody FAQs

Family Home in Divorce Part II

By Warren R. Shiell

The following information is specific to California.

What are the options for dividing the house?

There are three options if you are trying to reach a settlement:

  • One spouse buys out the community interest share of the other spouse;
  • The house is sold and the proceeds are divided; and
  • The house remains in joint names for a limited period of time and is then sold to the        other spouse or is put on the market.

During economic downturns when house prices are depressed couples increasingly turn to the last option.

            But there is a catch. If you litigate, option (c) is called a deferred sale order (or a “Duke Order”) and the Court can only order a deferred sale in very limited circumstances where it is in lieu of child support and economically feasible. FN3.

 

Must the house be sold?

            If the home is only asset of value in the marriage, the house may have to be sold unless

one spouse is able to raise sufficient funds to buy out the other. Otherwise there are several ways to buy out a spouse’s interest in the family home.

            1.         One party may be able to buy the other out if they can re-finance and qualify for a new mortgage on their own using their own income. The selling spouse should never agree to remain on the mortgage.

            2.         If refinancing does not generate sufficient income, the selling spouse may be persuaded to accept an installment note secured by a deed of trust on the home.  This is generally a bad idea. A spouse who cannot afford an immediate buy out upon divorce, in the long run is probably not going to pay all the costs associated with maintaining a home and pay back the installment loan.

 

            3.         Another option is buying out all or some of the community interest in the house with a release of spousal support. You will need to consult with an attorney and a tax specialist to determine the present and after tax value of the total support payments that are being exchanged.

            4.         It may also be possible to borrow from a retirement plan to finance the buy out. Again you should consult with a pension and tax specialist to discuss the costs of borrowing from your retirement plan. You may have to pay income taxes on the withdrawal and 10% early withdrawal penalties. You should also find out whether such a loan qualifies for mortgage interest deduction on your taxes. FN4

            5.         If there are other assets in the marriage, one spouse may elect to keep the house and the other may keep assets of equal value. For example, if the equity in the house is $200,000 and the value of pensions is $200,000 one spouse may keep the house and the other may keep the pensions. This is discussed in more detail below.

 

(read more on our website)

 

Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell

Call for a free consultation now 310.247.9913.

Divorce and Money

Los Angeles Family Law Attorney

Divorce Lawyers|Attorneys Los Angeles, Beverly Hills

California Prenuptial, Prenups 

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