Divorce is a huge emotional upheaval for any couple or family. Unraveling two intertwined lives, especially if the marriage was long, can be complex, time-consuming, and emotionally and physically exhausting. One of the biggest considerations for divorcing couples, outside of making arrangements for their children, is what will happen to their family home.
The home is often a couple’s most high-value asset, as well as the possession to which they’re most emotionally attached.
Homes are places we create, where we raise families or run around after pets. There are also practical factors that determine what happens after divorce. If the children must remain in the home, if either parent can afford to maintain the house as a single parent, and rules around taxation, it may even be better to start the process of selling the home before anyone files for divorce.
We recommend that you always seek the advice of a specialist attorney to deal with these kinds of situations. But then, as a primer, here’s a guide to whether you should sell a house before or after divorce in the state of California.
While understanding who legally owns the home might seem straightforward, there are other legalities at play other than ‘I own it because I bought it.’
In California, there’s a presumption known as ‘community property presumption,’ which assumes that both spouses equally own the house. If only one spouse is named on the title for the home, this changes the presumption that the named spouse is the sole homeowner. The spouse who isn’t on the title can only claim equal ownership if they have substantial evidence that the home was purchased based on them having equal ownership.
CPP doesn’t apply if the home was gifted or inherited.
If the home is owned by one spouse and was purchased before the marriage, that spouse remains as the home’s sole owner in most circumstances. However, if the other spouse has made significant contributions to costs such as mortgage payments or renovations, especially if the marriage has lasted a long time, they may be able to claim equal ownership.
What happens to your home in a divorce will be determined by whether it’s deemed as a separate property (belonging to one spouse) or community property (belonging to both spouses equally).
Selling the home
For homes that are designated as community property, there are two routes that most couples will go down – selling the home and splitting the profits, or one spouse buying the house from the other.
In the first case, the divorcing couple simply sells the home and splits the proceeds. If neither half of the couple can afford to keep the home, nor wants to do so, this is usually the best option. For couples where one partner can afford to keep the home, they can take solo ownership of it by buying the house outright and paying their former spouse money amounting to their half. Anyone going down this route will also need to entirely refinance the home, so that their ex-partner is no longer named on the title.
These are the two most common outcomes for divorcing couples, but there are other options, too.
In some cases, if a spouse buys out the other, the selling spouse is court-ordered to pay the mortgage as a form of spousal support. This can create complex tax considerations, so make sure you know all the implications of this eventuality in advance.
When children are involved, it’s also possible for divorce courts to order a couple to defer the sale of their home, or for both spouses to stay as named homeowners on the title. The court determines a set period where both partners continue to own the home, but the parent who has primary custody lives there with the children.
This is designed to limit the impact of the divorce on the couple’s children, and is decided based on factors including the age of the children, potential disruption to their schooling, the length of time the children have lived in the home, any modifications made to the home for children with specific needs, the proximity of the home to the custodial parent’s workplace, and several other financial considerations.
The most important financial consideration is reasonably obvious. If the custodial parent can afford to keep the house after the deferment period is over, it’s highly unlikely that a court will recommend a deferred sale when the custodial parent couldn’t afford to continue living in the home.
If the court orders a deferred sale, the house must not be sold until the period covered by the order is over.
Entitlement to financial reimbursement
Even once ownership of the home and any other considerations have been decided, any potential reimbursements will still need to be arranged. If one spouse has been determined as the sole owner of the home, the other may still be entitled to claim reimbursement based on contributions they have made to the home’s upkeep throughout the marriage. This is known as ‘community funds paid for separate property’ and applies when a non-homeowner spouse is determined to have made significant financial contributions amounting to an interest in the home, such as mortgage payments or renovation costs. These spouses can then be financially reimbursed for these contributions.
California law also has a unique provision called ‘Epstein Credits.’ Under this provision, a spouse that has continued to make mortgage payments on a home after they are no longer living in it (but before a divorce is finalized) can be reimbursed, unless the spouse has previously agreed that they won’t seek any kind of reimbursement.
Epstein Credits also don’t apply if both spouses continue to live in the home during this period, as in these cases, it’s reasonable to expect that both will continue to pay the mortgage.
In other cases, where one spouse maintains residence in the family home between separation and divorce, the other (if a co-owner) can charge them half the rental value of the house for that period. This is known as a Watts Charge. Like Epstein Credits, Watts Charges also don’t apply if a prior agreement has already been made. Watts Charges only apply for the period between separation and divorce.
Ask the experts.
Please remember that this article isn’t intended to provide legal advice, and each case is different. Your attorney will know which way is best for you to proceed.…