THRESHOLD ISSUE: IS THE MARITAL RESIDENCE AN ASSET THAT IS SUBJECT TO EQUITABLE DISTRIBUTION?
In most New Jersey cases the home is considered joint marital property and will be subject to equitable distribution at divorce. How do we determine if the home is marital property? The main issue we look at is when the property was purchased.Typically, if the marital residence was purchased during the marriage, it is likely to be considered a marital asset.
If the house was purchased before the marriage by one spouse, it may be considered separate property and may be awarded solely to the spouse who purchased it. The reason we have to use the word ‘may’ in this context is that there are special circumstances under which property that would otherwise be considered separate property may become joint property. If there are questions about who the owner(s) of the marital home are, it is best to discuss the issue with an attorney.
OPTIONS FOR DISTRIBUTION OF MARITAL RESIDENCE
Once it is determined that the marital residence is an asset that is subject to equitable distribution, the question becomes how to distribute it. With things like bank accounts it is easy to divide the asset into parts and give some of it to each former spouse. With real property however, it is trickier. Below are three options for the equitable distribution of a marital residence in New Jersey.
1.Sell the marital residence and equitably divide the proceeds
The most common option for the distribution of the marital residence is to sell the property and have the proceeds of the sale distributed to the former spouses. This option is often preferable to the parties because it removes the complication of having one of the spouses remain in the home. It also is often the cheapest option, as the other two discussed below may incur additional fees or require a delay in receiving distribution of the assets value.
2. One spouse buys out the other spouse and keeps the marital residence
If one of the former spouses wishes to keep the marital residence, the parties can agree to have that spouse “buy out” the other spouse. If the home has a mortgage on it, the purchasing spouse will need to refinance the mortgage in his or her sole name, removing the name of the other spouse. This option is often used when the couple has small children who may be adversely affected by having to leave their home during an already difficult period of their lives. The process of refinancing the home mortgage and changing the ownership documents need to be handled carefully to avoid the non-purchasing spouse from being adversely affected should the purchasing spouse default on the loan.
3. One spouse stays living in the marital residence for a set period of time, then sells it
This option is typically used by former spouses who have minor children who will soon leave the home. A common scenario for this option allows one spouse and the children to stay in the home until the children leave for college. Once the set period of time is up, the marital residence is sold and the proceeds are equitably distributed among the former spouses. This option requires the cooperation of the former spouses, since the home remains jointly in their names during the set period of time. If the parties cannot cooperate to jointly handle the ownership of the home, this may not be a good option.
If you are facing the possibility of divorce and are a homeowner, you likely have questions about what will happen to your property. Call the Law Offices of Peter Van Aulen today for a free initial consultation to discuss your particular case.