A family residence often is one of the most important assets that many people will ever own. Upon divorce, it becomes clear that both parties cannot remain living together and the issues of who will remain in the residence, pay the mortgage, and retain its equity have to be dealt with.
There are several ways in which the parties can live in separate residences and still maintain the family residence. This is an overview of each party’s rights to the family residence and how to pay for the residence-related expenses.
Who stays in the family residence? Most divorces entail the parties separating and residing in separate residences. When that happens, there are several ways to decide who will stay in the residence during the divorce proceedings.
- The parties can agree upon who will reside in the residence. For example, if one parent is the primary caregiver, it may make sense to have that parent continue to reside in the residence to give the children more stability. Or one of the parties may be happy to be move out of the residence in which case there is no issue.
- The court can order it. If the parties cannot agree, there is always the option of having a trier of fact decide who resides in the residence. For example, if there is domestic violence involved, the non-offending party can obtain a court order directing the domestic violence perpetrator to move out. Or, the parties can present their case to a trier of fact and have the trier of fact rule as to which party will continue to reside in the residence during the divorce proceedings.
Options to pay the family residence expenses. Both parties have a legal duty to ensure that the residence expenses are paid during a divorce proceeding. If either party fails to pay the mortgage without a proper legal reason and the residence goes into foreclosure, for example, the spouse who failed to pay the mortgage could be liable to the other for a breach of fiduciary duty. These are some examples of ways in which the residence can be maintained during divorce proceedings.
- The parties can agree to pay those expenses however they see fit. This includes the mortgage, property taxes, insurance, and residence maintenance. Either the community estate or the parties would have a right to reimbursement for any post-separation contributions.
- The residence expenses can be paid in lieu of spousal support. This refers to a situation where the supported spouse remains in the residence. An example would be a stay at home parent who was out of the work force during the marriage and the supporting spouse is a high wage earner. In this case, the obliging spouse would have a responsibility to pay spousal support anyway and it might make financial sense for the supporting spouse to simply pay the mortgage and residence related expenses during the divorce proceedings instead of spousal support.
- The parties can agree to use community monies. The parties can expend community monies, such as savings or other liquid assets. to pay the residence related expenses. If the parties cannot agree, either of the parties can request the court to order it.
- A party can agree to use separate property monies. This refers to a situation which one party either earns enough money to pay the residence related expenses or has separate property assets to pay those expenses. In this situation, the spouse making those separate property contributions would have a right to reimbursement.
Ownership interest in the family residence. The parties’ respective ownership interests in the residence depend on the nature and character of their financial contributions to that asset. These are some examples of how the parties’ financial interests in the residence could be divided.
- The residence is paid for with separate property. If one of the spouses pays for the residence in full with separate property monies, then that spouse owns one hundred percent of that asset as their sole and separate property. This would be a situation, for example, if the spouse owns the residence before the marriage or pays for it with separate property monies during the marriage.
- The residence is paid for with community property. If the residence is purchased with community monies and paid for with community monies, then the community owns the residence and any equity in it.
- The residence is a mixed character asset. This refers to a situation where both separate and community property monies are contributed to the asset. For example, the husband purchased the residence before the marriage and carried a mortgage. During the marriage, the parties used their community earnings to pay down the mortgage. Thus, the husband would have a separate property interest in the residence and the community estate would have an interest in the residence. The parties’ interest in the residence would be apportioned according to the amount of their separate and community property contributions including appreciation in value.
Options to divide the family residence. When the parties are dividing the family residence, they have several options.
- The residence can be divided as part of the community estate. If the community estate has enough assets in it, then this can be done by an equal division. One party would essentially trade the residence for another asset.
- An equalization or buy out payment. This refers to a situation where one party buys out the other party’s interest in the Fresno family home. This can be done over time, with the spouse obtaining a loan or making other financial arrangements, or with a one-time payment.
- The residence can be sold. If neither party can afford to maintain the residence on their own or do not want to for emotional or practical reasons, the parties have the option of listing the residence for sale and dividing the sales proceeds according to their respective interests.