The Rules and Exceptions on Dividing a House During a Divorce

One of the hardest things a couple goes through during a divorce is property division. This includes the family house as well as vehicles and investments. Usually, the biggest asset is the house; hence, emotions can make things even more difficult. The legal status of the couple and the value of the house will determine how the house is divided.

Though there are rules and exceptions, the house is usually the subject of division in a divorce. Whether the pair were merely living together or legally married determines who receives what. Let’s look at how the law divides a house during a divorce and the cases when there are exceptions.

For Married Couples: Equal Sharing of Property Value

Under the law, married couples are regarded as equal partners. Each partner is believed to have contributed to the household, whether by supporting or earning. Any increase in property value during the marriage is therefore shared.

This is how it works:

• From the marriage date to the separation date, each spouse lists their property and debts.
• They calculate how much their house has appreciated during the marriage.
• The partner having more property value pays half the difference to the other.

We term this process an “equalization payment.” It makes sure both partners walk away from the marriage with equal value.

The Family Home Has Special Rules

The family home, sometimes known as the matrimonial home, is handled differently than other real estate. Whichever name appears on the title makes no difference. Both have an equal entitlement to the value of the couple’s main house during separation.

Important rules regarding the family home:

• Even if just one partner paid for it, it has to be divided equally.
• What really counts is the value of the separation date.
• The full value of the house is included if it was owned before marriage but used as the family home.

Unless a documented agreement, like a marriage contract exists, spouses cannot exclude the family home from equalization.

What If the Home Was a Gift or Inheritance?

Even during a divorce, some property is not divided between couples. We call this excluded property. It usually includes inheritances or gifts received during the marriage.

However, there’s an exception:

• If the gift or inheritance was used to acquire or upgrade the family home, it becomes part of the shared value.
• Some examples of excluded property include:
• Money inherited from a parent and kept separate.
• A house donated as a gift but never used as the family home.
• Payouts for life insurance.

It might not be excluded, though, once the money is combined with family assets.

When One Spouse Has More Debt

One partner occasionally finds themselves in more debt than they have in property value. This means that, when calculating their share, they have a negative value.

The law handles this as follows:

• A spouse with a negative or zero value is said to have $0 as their Net Family Property (NFP).
• The other partner still divides their increase equally.
• Usually, the partner with the higher NFP pays half the difference.

This rule prevents one spouse from being unfairly burdened because the other has too much debt.

When the Court Changes the Rules

There are rare occasions when the court steps in and changes the equalization amount. This only happens if the regular division would be unfair to one spouse.

Some reasons the court might change things:

• One partner hid debt or property at the start of the marriage.
• One spouse spent money foolishly before the split.
• A huge difference in financial situations between the two.

In these circumstances, a judge might mandate a different payment or outcome to make things fair.