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WHAT HAPPENS TO THE MARITAL RESIDENCE? |
| Q: |
I am really attached to my house. This is the place where I have been raising the children/or/ I practically built this house myself. Above all else in this divorce I want the house. Can you get it for me? |
| A: |
Probably, but you will probably overpay. For example, if I walk into an antique store and tell the dealer "I have to have that lamp", what happens to the price? It goes up! If there is something that you have to have in the divorce settlement, the price is likely to go up. In divorce settlement negotiations you should not have a sentimental attachment to any of the assets. You should look at all assets for what their value is. |
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| Q: |
When I file for divorce doesn't my husband have to move out of the home? |
| A: |
No. That would not be fair. What if your husband files for divorce first? Would that mean that you have to move out? Of course not. The law does provide means for the eviction of a spouse from the residence. Under the Domestic Violence Act an order of protection can evict a spouse or, under the Marriage and Dissolution of Marriage Act there can be the eviction of a spouse upon proof that "the physical and mental well-being of either spouse or their children is jeopardized." The jeopardy, however, is difficult to prove. |
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| Q: |
The house and my husband's pension plan are the two big assets in the marriage. I would like the house. Is this doable? |
| A:: |
Probably. The house and pension plan are usually the two largest assets in the marriage. Often the equity value (fair market value of house less mortgage balance) of the house and the value of the pension plan are close in value. If such is the case, there can be a trade whereby you keep the house and your husband keeps his pension plan. |
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| Q: |
The way the divorce settlement is developing it appears that if I end up with the house I will owe my spouse $50,000. I do not have $50,000 and the equity in the house is not sufficient so we can refinance it and obtain the $50,000. Is there something I can do to keep the house? |
| A: |
Yes. An agreement can be worked out by which the house is evaluated at this time, and by deducting the mortgage balance from the value of the house, we arrive at the equity. Let's assume that you will be receiving 55% of all marital assets and that the equity in the house is worth $100,000. On a 45% basis to your husband, his interest in the house will be $45,000. Under the agreement you would be committed to pay your husband $45,000 sometime in the future, say five years from now, plus interest (at whatever current interest rates are for mortgages, or whatever interest rates you agreed to) at the end of the five years. At the end of the five years you should be in a position to finance the real estate and pay off your husband. If you are not inn such a position, you will have to sell the real estate to pay off your husband's interest. |
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| Q: |
I would like to keep the house, especially for the sake of the children, but can I afford to do so? |
| A: |
Let's do some calculations. The best way to start is with an actual budget of your living expenses after the divorce and compare that to the income you anticipate having after the divorce. A shortcut I use, because I may not have my client's budget in front of me, is that the homeowner requires net (take home) income of three times the amount of the mortgage payment. If the mortgage payments are $1500 a month you will require a net income of $4500 a month to afford the house. If you receive $1500 a month in child support you will need to earn a net (take home) income of $2,000 per month to afford the house. The shortfall of several hundred dollars per month, however, can be made up with a bit of belt tightening. |
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| Q: |
Can the court order the sale of the marital residence? |
| A: |
Yes. |
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| Q: |
How do we arrive at a value for the house? |
| A: |
Either the spouses agree on what the value of the real estate is, or they have it appraised. If you have it appraised, do not do so with a realtor if the realtor believes he may obtain the listing for the property, because those evaluations are generally on the high side and not realistic. Obtain an evaluator to whom you pay a fee for the evaluation and tell the evaluator that the property is not going to be listed for sale by the realtor and that the purpose of the evaluation is to establish a value for the sake of the divorce. |
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| Q: |
My spouse and I agreed that I would keep the house. From the value of the house, can I deduct the costs of sale and the capital gains tax I will experience upon the sale of the house? |
| A: |
No. The law states that you cannot deduct these items because a sale sometime in the future is speculative. If, however, you know that the house will be sold in the near future, your agreement can provide for the deductibility of the anticipated costs of sale, capital gain etc. |
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| Q: |
If I used the money I inherited (or received as a gift) to reduce the mortgage on our jointly owned home, will I be reimbursed because the inheritance was non-marital? |
| A: |
Maybe. Contribution of personal effort to a non-marital property is not recognized unless the effort is significant and results in a substantial appreciation to the non-marital property. You are not, however, reimbursed to the extent of the added value. That added value becomes marital property and will be divided between the two of you. |
