1. What are my options with regard to the house?
The marital home is in most cases the family’s most valuable asset. Upon a divorce, there are three choices that a divorcing couple can choose to equitably distribute the family home. The easiest option is to sell the home and to split the proceeds. In many cases the family home has too much equity and it is impossible for one spouse to buy out the other spouse. Therefore, in many cases the mortgage principal is just too high and the best solution is to sell the marital home.
The second option is for one spouse to buy out the other spouse’s equity. One way to accomplish a buy out is to refinance the home. At the closing the selling spouse will receive their share of the equity of the marital home. Moreover, the selling spouse will be able to have their name taken off of the mortgage at the refinancing. It must be kept in mind that there are costs to effectuate a refinance. These costs typically range from $5,000 to $15,000. These costs include title costs, a new survey must be obtained, recording fees, and there are lawyer fees. This factor must be taken into consideration when negotiating a divorce settlement.
The third option is to maintain the status quo. This means that the marital home is neither sold or refinanced. In this type of scenario, one spouse will move out of the marital home, and wait for a period of years before the house is sold. This type of option is usually advisable if there are children, and if they are in high school. Divorce is very hard on the children as well. Many divorcing couples don’t want to upset the children anymore by forcing them to leave their school. Therefore, many divorcing couples agree to keep the marital home until the children graduate from high school. This type of option should only be explored if the children are in the later stages of their high school years. It is extremely difficult for divorced spouses to cooperate and to keep a family home operating and fully paid for. Therefore, option three should only be explored if the children are in the junior and senior years.
I want to warn all web surfers who choose option three. It can really turn into disaster if you remain on the title with your ex-spouse on the marital home. If you remain on the title with your spouse then any liens or judgments that your spouse receives also will attach to you as well. In simpler terms if your wife or husband obtains a lien against them then this lien will also ruin your own title as well.
I have had one case wherein the parties agreed to permit the wife to live in the marital home until the children graduated high school. The wife lived in the house for an additional ten years after the divorce was finished. When the wife wanted to sell the home after the children graduated from college, she became aware that her ex-husband had 25 judgments and liens filed against him. To complicate matters the husband also died. The liens consisted of judgments, tax liens, sales tax liens, and surcharges. What a disaster! All of these liens impaired my client’s title and she was unable to sell the marital home.
In summary, it is not a good idea to retain co-ownership of a marital home after a divorce. The liens filed against the spouse who moves out will still attach to the spouse who continues to live in the marital home. This can really create a disaster. Liens prevent a person from being able to refinance their mortgage. Liens ruin your credit. Liens can create massive aggravation. Option number three is not advisable. However, if you choose option three always monitor the state of your title. Moreover, always maintain some type of communication with your ex-spouse to ascertain if he or she is experiencing any type of financial trouble, and whether any judgments and/or liens have been filed against them.
2. When is the marital home considered to be marital property?
In most divorce cases the marital home is the most valuable asset that the couple owns. Generally, if a home was acquired “during the marriage” then it is subject to equitable distribution. If a spouse owns a home prior to the marriage, then it remains separate property and it is not subject to equitable distribution.
3. My marriage is a disaster. I fight all of the time with my wife and I want to get a divorce. Should I move out of the marital residence?
At many of my initial consultations with family law clients, one of the frequent questions that I hear is “should I move out of the marital residence?” My answer to this question depends on the particular family situation. If the parties are thoroughly sick of each other, then I advise the client to move to a separate part of the home and to not leave. If the marriage has a history of domestic violence, then I do advise the client to leave the marital home.
Domestic violence is a problem in more than one half of my cases. Every month the front covers of the Asbury Park Press, the Home News Tribute or the Star Ledger are filled with murder cases committed amongst spouses. If you are going through a divorce and if you are living together then a flare up can turn deadly. In my younger years, I used to handle all public defender pool assignments. I have represented at least ten clients who have murdered their spouses in acts of domestic violence. These people were normal everyday people before their tragedy occurred. If the marriage is violent then I always advise a client to move out no matter how much rent he will have to pay, or whatever the economic ramifications will be. A person can always make more money. However, a person can’t unravel an act of domestic violence if it should happen to occur.
If the parties are just miserable and if they are going through a divorce, then the family court will not order one spouse to leave the marital home. A family court will not order one spouse to leave unless there is a history of domestic violence. Instead, the court may order one spouse to live in the basement and the other spouse to live in another section of the home. Be forewarned though, my most stressful divorces have occurred when the parties continue to live together during the divorce process. A simple divorce can turn into a nightmare if the parties live together during the divorce process. It is common for a spouse to start dating again during the divorce. If the dumped spouse becomes aware any of new girlfriends and boyfriends during the divorce process then this amounts to the “perfect storm” for a divorce war. Remember the only people who win in a divorce war situation are the lawyers. Try to keep a divorce civilized if possible so as to save your assets. Lawyers already have enough work and money, and they don’t need all of your life savings.
Many clients also frequently ask me if they leave the home will this constitute desertion. My answer to this is that it is irrelevant. The bottom line is that New Jersey is no longer a marital fault state. Any person can get divorced in New Jersey at any time and for any reason. A person does not need specific grounds to get divorced. Therefore, if a person leaves the marital home this factor really will not give the other spouse an “edge up” in the divorce.
4. I have just purchased a beautiful new home with my wife. I have paid the entire $100,000 deposit with my own money that I earned prior to the marriage. Our marriage is a disaster and we are now getting divorced. Is the $100,000 deposit subject to equitable distribution?
This issue arises occurs very frequently. When a couple is in love they rarely consider the financial consequences if the marriage is a failure. In many marriages one spouse comes in the marriage with most of the money. Quite frequently the husband pays for the entire deposit to purchase the marital home with premarital monies. If the couple ultimately gets divorced then the husband will then try to claim that the deposit monies consisted of premarital monies, and that it is not part of the marital estate. This type of analysis is flawed and it will shock many upset spouses.
A very illustrative case is Weiss v. Weiss, 226 N.J. Super. 281 (App. Div. 1988). In the Weiss case, the husband made a $5,000 down payment on the marital home and he executed a mortgage on the home and a note four months before the marriage. The title to the home was placed in his name solely. Together, the parties made substantial repairs and improvements to the home both before and after the marriage. The Weiss court held that the down payment was a marital asset. The court further held a marital partnership was found to have commenced before the marriage ceremony. Moreover, the court further held that the home was specifically acquired in contemplation of their marriage. As a result, the home purchased by Mr. Weiss prior to the parties’ marriage was subject to equitable distribution.
This case is frequently cited by courts when they analyze the issue as to whether a down payment is considered by a marital asset. The bottom line is that if one spouse pays for the down payment to purchase a marital home, then these monies are converted into marital property and it will be subject to equitable distribution.
In summary, when one party contributes money toward the purchase of the marital home, and places title to the home in both the husband’s and wife’s names, unless there is prenuptial agreement, the contribution of that money is considered a gift. Thereafter, the entire down payment will be considered to be marital property.
If a spouse is making a significant down payment that consists of premarital monies, then it is always advisable to have a basic prenuptial agreement. The parties can agree that in the event of a divorce, then the deposit used to purchase the marital home will be repaid to the contributing spouse before any proceeds are equally divided. The prenuptial agreement can be short and sweet and provide that the contributing spouse must receive their deposit returned to them before the proceeds from the sale of the marital home are split. This issue also frequently arises when one set of in-laws provides the funds to pay for the down payment for a marital home. A prenuptial agreement can provide that the in-laws shall receive their contribution back if the marriage is terminated and if the marital home is then sold.
5. I owned my home prior to the marriage. Once I became married I placed my wife on the deed with myself. Is the marital home still considered to be a joint asset even if the marriage lasted only a short duration?
When one party owns a home prior to the marriage but during the marriage transfers title to both parties, the transfer is considered to be a gift which then transforms the property into a marital asset subject to equitable distribution. It is important to note that even though the case law consistently holds that a pre-marital residence that is converted into an asset that is subject to equitable distribution when the title is placed into joint names, it does not necessarily follow that the value or the equity of the home will be equally divided by the spouses. If the marriage is a short one, then the spouse who owned the home before the marriage will receive a credit for his/her contribution. However, the longer the duration of the marriage, then it is less likely that the spouse who owned the home before the marriage will receive any contribution credit.
6. The mortgage payments for the marital home are ruining me. The stress caused from paying the high mortgage payments is one of the main reasons why we are getting divorced. Can I request permission from the court to sell the marital home even before the divorce is finalized?
In many cases a primary reason why a couple gets divorced is because of financial pressures. High mortgage payments and oppressive property taxes often create so much stress in a marriage that divorce is often unavoidable. In some divorce cases many spouses believe that it is necessary to sell the marital home before the final disposition. The general rule governing a request to sell the marital home pending the final divorce is set form in the case important case of Grange v. Grange, 160 N.J. Super. 153 (App. Div. 1978). The Grange court held that a family court does not have the authority to distribute a marital home that is jointly owned during a divorce action where both parties do not consent to its sale. Basically, the Grange case stands for the principle that in most cases a family court will deny a motion to request a sale of the marital home pendente lite or during the middle of the case. There are exceptions to the Grange case though.
In the Grange case, the husband sought to compel the sale of the marital home because he could not afford to make the mortgage payments any longer. The trial judge permitted the sale of the marital home and it permitted Mrs. Grange to challenge the purchase price and to seek equitable distribution based on the fair market value of the property. The appellate court reversed the trial court and it held that the lower court did not have the authority to compel the pre-divorce sale of the marital home.
There are circumstances when a family court will grant a motion to compel the sale of marital home pendente lite. If a marital home is in foreclosure then a family court may grant a motion to compel its sale before the final divorce is over. Moreover, if a spouse can prove to a court that the marital home will soon go into foreclosure, then a court may grant a motion to compel its sale. If a family does not have the financial resources to meet the monthly mortgage payments, then in many cases a court will grant a motion to compel the sale of the marital home pendente lite. Thus, even though the general principle that the marital home may not be sold during the pendente lite phase of a divorce case, there are certainly some circumstances in which a sale will be allowed.
7. As part of the divorce settlement my ex-wife was given the marital home. As a result of this transfer am I now automatically taken off of the mortgage as well?
In many cases the wife is awarded the marital home as part of a divorce settlement. The bottom line is that in the majority of the cases the wife is given residential custody of the children and they need a place to live. In New Jersey the costs of rents often equal and in some instances even exceed monthly mortgage payments. Therefore, it makes no sense to sell a family home.
Many husbands mistakenly believe that if they deed over their share of the marital home to their wife, then they are also taken off of the mortgage instrument as well. This is entirely wrong. The mortgage instrument is still valid and the husband is still legally obligated as a mortgagee on the mortgage even if he transfers title of the marital home to his wife. The mortgage is a separate legal document from the deed. The husband is not automatically taken off of the mortgage instrument if he transfers his share to his former spouse. I have had several clients who are shocked when they receive a foreclosure complaint years after the divorce, and they have moved out of the marital home. They have advised me that they believed that their name was taken off of the mortgage. As a result of this snafu many people ruin their credit by having a foreclosure entry placed on their credit report. A foreclosure is the second worst entry on a credit report. The worst entry on a credit report is a bankruptcy. This calamity may very well prevent a disgruntled ex-spouse from purchasing a new home or obtaining a new mortgage.
To avoid this type of catastrophe it is imperative that after a divorce the mortgage must be refinanced. The spouse who moves out must have his or her name taken off the mortgage. The most common method how this is accomplished is via a refinance. Alternatively, some mortgage companies will permit a spouse to be taken off of the mortgage. A divorcing couple will have to complete a lengthy application called an assumption agreement. Basically, the spouse who continues to live in the marital home will agree to assume any and all responsibility for any mortgage debt. The spouse who leaves the marital home will then be released of any financial responsibility of the mortgage.
It is lengthy application and it is a very document intensive one. Tax returns and a current appraisal must be submitted as well. Moreover, the bank will also require that the loan to value (LTV) is very high. If there is sufficient equity in the marital home then a bank will carefully consider a request to release a spouse from the mortgage. However, if there is no sufficient equity in the marital home then a bank most likely will not consent to removing a spouse from the mortgage.
8. I am selling my share of the marital home to my wife. What are my tax consequences from this transfer?
There will be no capital gains and no federal taxes due to a spouse who transfers his share of the marital home to the wife. Internal Revenue code Section 1041, entitled “Transfers of Property Between Spouses or Incident to Divorce,” provides that where property is transferred to a spouse or a former spouse – if such transfer is incident to the divorce – then no gain or loss will be recognized by transferor/spouse. Moreover, the spouse who becomes the sole owner of the marital home takes the same basis in the house as he or she had when the parties owned it.