Issues Surrounding the Division of the Marital Home in Divorce
How to address whether to keep or sell the family home in the wake of divorce is a looming issue for a lot of couples, since the house is often the largest tangible asset they own. There is also the issue of a child’s attachment to the home for security, community and school purposes that can complicate selling the property and splitting the proceeds. Florida follows the equitable division model when distributing marital property in divorce, which says the court will award property according to what is most just, though there is a presumption the marital estate should be divided equally. Often, the family home is titled in the names of both spouses, and both are responsible for any outstanding mortgage on the property. Whether the home is kept or sold, two central issues can occur when dividing the marital home in divorce: how to handle credits for mortgage payments made while the divorce was pending and prior to sale, and what interest, if any, a spouse would have in a home considered to be the separate property of the other spouse.
Credit for Mortgage Payments
It is not uncommon, especially if children are involved, for one spouse to remain in exclusive possession of the marital home while the divorce is pending, and the property sold afterwards. In these situations, the spouse in possession is typically paying the mortgage on his/her own, and understandably wants additional credit for the share of the other spouse’s portion of the mortgage he/she covered. The other spouse usually argues, in response, the party in possession should be obligated to pay something for living in the home, and thus, did not assume an unfair financial burden. However, spouses who assume mortgage payments may be entitled to a credit or setoff upon the sale of the home in certain circumstances, meaning he/she takes a larger percentage of the sale proceeds received. The analysis for this issue is quite complicated, but Florida law outlines some factors courts should use to decide whether a credit is appropriate, including:
- whether one spouse was awarded exclusive possession of the home before a sale and a decision on property division;
- whether alimony or child support was awarded to cover a portion of the mortgage;
- the value of the home to each spouse;
- whether a spouse will be responsible for paying capital gains tax upon the home’s sale; and
- which spouse is entitled to claim tax deductions for mortgage payments.
How much credit a spouse in possession of the home might be awarded would be based upon how much the mortgage was paid down, plus any corresponding increase in the value of the home’s equity.
Spousal Interest in Separate Property
The other potential complication in the division of the marital home occurs when a spouse owns the house as separate property, and the other party wants to claim an interest in it for purposes of property division. If the home mortgage was paid with marital funds, the other spouse may have rights to a portion of the passive appreciation accrued during the marriage. The Florida Supreme Court addressed this issue in a 2010 decision, Kaaa v. Kaaa, which held that the spouse who does not own the home is still entitled to any passive appreciation in the home’s equity earned during the marriage if contributions from the marital estate, in the form of money or efforts, increased the value. Passive appreciation is based upon the current value of the home, and the value of the property, compared against the amount of indebtedness, at the time of the marriage. This particular issue is likely to generate a lot of litigation, and is best addressed by executing a pre- or post- nuptial agreement so property rights are clear.
Determining how to settle division of the marital home is a primary issue in divorce, and your situation should be reviewed by an experienced divorce attorney to determine what the most appropriate legal options might be. The attorneys at the Orlando law firm of Goodblatt ∙ Leo know how to evaluate the contribution each spouse made to the acquisition and appreciation of property, so a fair settlement can be found. Contact us at (407) 228-7007 to schedule a consultation.