When a married couple who own a home decides to part ways, division of the residence and its equity can become one of the most contentious issues among those to be negotiated.
Often, spouses are able reach an agreement on how to divide their property equitably – ultimately saving time, curbing excessive attorney fees and avoiding the pain that comes with a drawn out legal proceeding. But if both parties cannot reach a peaceful arrangement, the court will ultimately decide how the property will be divided, say the experts.
The apportionment of real estate and other property in a divorce is governed by state law, and, consequently, it differs from state to state, says Joe Russo, broker with Docks Only Real Estate, Lake Norman, N.C.
"There is no 'usual' settlement in any divorce," he says. "Different arrangements can be made, depending on what the parties agree to, as in a prenuptial agreement."
When it comes to property division, most states fall within one of two categories: community-property states and equitable-distribution states. In the former, most property earned or acquired during the marriage is shared equally between the two spouses, including a home. In the latter, the court partitions the property in a fair and just manner, depending on the decision of the judge and the laws of the state. Courts in equitable distribution states have much discretion and will examine multiple factors when deciding what is a fair and equitable division of the property, including the length of the marriage, each spouse's earning capacity, the contribution of either spouse in obtaining the home, and each party's health and age.
Other key circumstances, such as the presence of any minor children and when the home was bought, can significantly affect how the home will be divvied up by the court. Typically, if the residence was purchased during the marriage and the husband and wife have no minor children, the judge will partition the property equally between the spouses.
One way this is done is to set off one spouse's interest in the home with other property. For instance, the wife will get the house, while the husband may receive other property worth the equivalent of the home. In many cases, the court may determine it best to force a sale of the home and apportion the proceeds between both parties.
"Usually, both spouses share the equity in the house," says Elinor Robin, Ph.D, a divorce mediator in Boca Raton, Fla. "They may share it at the time of divorce or they may set a time limit – for instance, three years – during which time the home will be sold and the equity shared."
Read more at the New York Daily News.