This episode, we’re talking about one of the most contentious items in a divorce: the marital home. When a married couple splits, who gets to keep the house? The emotional baggage of that question gets even heavier when kids are involved and you have shared memories of your family growing up over the years.
So what are your options? The first (and simplest) option is to just sell the house, split the proceeds and move on. It’s not always simple – there are plenty of landmines of complications lying around – but it’s the fastest way to extricate yourself from any ongoing financial entanglement with your spouse.
Second, you could buy your spouse out by giving them whatever percent of the principal they are owed. Before going down this path, be sure to speak with a financial professional to figure out what it would look like for you to pay the mortgage on your own. In addition, if you remove your spouse from the mortgage, you will most likely have to get a new mortgage, which means a new interest rate, resulting in a potentially much higher monthly payment.
The last option is to continue owning the home together. Couples sometimes do this so the kids can stay in the same house and then the parents take turns living there, or the couple may opt to maintain the house as a rental. You don’t see this one very often due to the potential complications it carries, but it may be worth considering.
When it comes to divorce, potential complications abound, so it’s important that you speak with a tax professional to make sure you have the right understanding of what you’re doing. One option that’s good to be aware of is something called “property tracing,” where a tax professional helps sort out muddier real estate situations. For instance, if you bought a house when you were single and made payments by yourself for a few years before getting married, you are probably due to receive more of the proceeds of the sale than your spouse, even if they helped pay the mortgage while you were married.
Whatever you do, be sure to enlist the help of a tax professional and a financial advisor who can help you navigate all of this with fewer headaches. Tune in to learn more!
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