Divorce represents a major change for you as well as your family members that are all living under one roof. When you and your partner decide to separate or officially file divorce proceedings, critical questions will arise about what you should do with the family home. Determining what to do with the family home includes a careful consideration of numerous different factors.
You may wish to receive the home as the division of property. However, as an illiquid asset, it can be difficult to receive the cash from this home. Furthermore, the memories inside the home may be difficult for you to cope with, although it may be in the best interest of the children to keep the family home stable.
The residence, which can be a home, condominium or apartment, is usually the biggest marital asset and the decision about whether or not to remain in the home is based on emotions and financial reasons. It may be difficult for you to keep this in perspective and make a beneficial and sound decision that requires you to consider every issue that you face associated with this asset. You need to start with an income and expense statement that is accurate as well as a cash flow projection.
There are three primary issues associated with your decision to stay in the house. You can choose to put the residence on the market and sell it, hold on the to the house or keep it and agree to sell it at a later date, distributing the proceeds equally.
At time neither spouse has the financial means to keep the house due to limited income and assets. Putting the house on the market for sale can create cash flow and provide an easy way to divide marital assets. If the spouses have other assets, splitting the marital assets may be easier because the value of the house equity could be offset by the spouse’s other assets.
This allocation enables one spouse to remain in the house. The question is whether or not you can afford the upkeep and payments. It is recommended you keep your housing expenses between 30% and 36% of your total income. You should have appropriate income and other sources so you can pay all of your housing costs. If you could afford to keep the house then ask yourself whether or not it makes sense financially to keep it. Often, it is more sensible to rent a home because of tax deductible expenses.
It makes economic sense to buy when compared with rent because the future appreciation of the asset and tax-deductible expenses. However, liquid securities appreciate much more quickly than real estate. Housing declines in recent years have been abundant so it may be a concern about whether or not it makes sense for you to keep the home as a desirable asset.
There may be other reasons you wish to keep the house. Divorcing couples may wish to keep some stability in the children’s lives and therefore keep the home to minimize problems for the children. Both parties may agree to do this for a defined period of time after which they will sell the home and distribute the equity based on a previous agreement.
You must consider the value of the home equity in the divorce degree. Valuing equity in a home is not easy and you can adjust the equity value today based on its current fair market value. At the expiration of such a term, the equity value will be split between two parties.
Furthermore, the equity could be set as a percentage of the future fair market value to later be allocated between the spouses. It may be concerning for you to keep the house and worry about working with your spouse later on to come to agreeable terms so therefore you may wish to instead plan to sell the house now so you do not have to deal with this issue in the future. Scheduling a consultation with a knowledgeable Jenkintown, PA divorce and family law lawyer can help you in these difficult circumstances so you have a path charted forward.
At the Law Office of Joanne E. Kleiner, we have more than 25 years of family law experience. We’ll help you stay focused on what matters. To schedule an appointment with an experienced Pennsylvania divorce attorney, contact our office online or call us at 215-886-1266.