How do we Divide Our Property? Dealing With Assets During a Divorce: The Family Home
Going through a divorce is one of life's most difficult challenges. In addition to the emotional pain and anxiety divorcing spouses' experience, they must also confront the challenges associated with dividing marital assets(property acquired during the marriage). Often the biggest piece of marital property is the family home, which could have been purchased after the marriage or right beforehand, in “contemplation” of the marriage. Not only does the family home often represent the largest single asset, but divorcing spouses often also have an emotional connection to the property. Thus, determining what will happen to the home after a divorce can be a major source of contention for the spouses involved.
In dividing any property in a divorce, Illinois courts use a system known as “equitable distribution,” which means property will be divided in a manner the Court determines is fair (which is not always 50/50 between the parties). However a Court decides to divide property, it becomes particularly tricky when dealing with a piece of property, which can be “divided” in one of two ways. The house can be put up for sale and the profit or liability split between the parties, or one spouse can stay in the home and give a corresponding offset in value to the other spouse.
Selling The Family Home
The first option is to sell the family home and divide the proceeds (or liability) between the divorcing spouses. A decision to sell involves a number of related determinations typical of selling real estate, such as:
- Who will list the property?
- What will be the asking price?
- Who will make needed repairs or necessary upgrades?
- How will the property be marketed?
- Who will maintain the home until it is sold?
- How will the sale proceeds be split between divorcing spouses?
Typically, one spouse will remain in the home while it is on the market (though if spouses can get along, it is often financially beneficial for them both to remain in the home pending the sale). It is important to have court orders in place regarding the mechanics of the sale (listing price and how it will be determined, responsibility for upkeep and repairs, etc.) so that future arguments over these issues are mitigated. It is also important to keep in mind that, when selling, there will be ancillary costs such as realtor's commissions, taxes, and closing costs, which should be considered in negotiating the distribution of assets.
Transferring Title of the Home to One Party
In contrast to selling the home, another option is to transfer ownership of the home to one of the divorcing spouses. Usually this requires refinancing—modifying the remaining mortgage so that it is held in one spouse's name only. When refinancing, the party taking ownership of the home receives a signed deed from the divorcing spouse. In exchange, the spouse who is moving out receives a share of the home's current equity. A refinance is necessary if there are not sufficient other assets in the marriage to offset the value to the other spouse or if the other spouse's name needs to be removed from the mortgage.
The party taking ownership of the home must qualify for the refinance. This often includes demonstrating that the party has satisfactory income, credit, and an ability to pay the mortgage. Sometimes it will take time for the person to qualify for a refinance, and therefore parties often agree that a refinance must take place within a certain period of time (e.g., within one year after the divorce). Additionally, a spouse who may not otherwise qualify for a refinance may do so upon the receipt of maintenance (formerly known as alimony) from his or her spouse.
In determining the amount of money to be given to the spouse who is moving out, the Court must still determine what is an equitable distribution. This determination will vary and is case-specific. In some instances, for example, the Court may consider separate property contributions--such as down payments made from one spouse's separate, non-marital property funds--when dividing assets.
A Qualified Illinois Attorney Can Assist You
Decisions regarding the family home are difficult in any situation but are even more so in the context of a divorce. Divorcing couples will undoubtedly benefit from the help of an experienced attorney when negotiating issues surrounding the division of property in a divorce. A qualified Illinois attorney can help you draft a property settlement agreement that outlines the terms and duties of each divorcing spouse in regards to the sale of a home and can help ensure that future arguments surrounding the home are minimized pending the outcome of a divorce. If you are going through a divorce and have questions about how to deal with your family home or any other marital property, contact the Illinois family law attorneys at Mirabella, Kincaid, Frederick & Mirabella, LLC today. We are dedicated to helping divorcing spouses understand their rights and options in the context of not only the division of marital property, but in all aspects of divorce. Call us today for a free consultation.