In many California divorces, the biggest financial question is who gets the family home. Should the wife get it, should the husband, or should they sell it and split the proceeds? And if they sell the house, how should the proceeds be divided.
The Law Offices of Edward Misleh, APC is a Sacramento law firm, located in Sacramento, California that practices family law and represents clients in Sacramento, California and clients in Northern California with services they need and deserve when addressing divorce and financial matters. Call now our Lawyer Hotline. We offer a free consultation to all new clients. Call now 916-443-1267 for your free consultation.
The Family Home in Divorce
The family home is the place where you and your spouse reside and raise your children. Many times, the wife has an emotional tie to the family home and she wants to keep it because it is the place where she has raised their children, has decorated, and has entertained others. Unfortunately, she may want to keep the family home but may not be able to afford the property. Can she obtain a mortgage or make other loan arrangements to “buy-out” the husband? If not, then she will be limited to selling the family home. Additionally, she should consider that if she keeps the family home the impact it will have on her income. She will have to pay a mortgage with money that she may need to buy groceries, for transportation, of for other unexpected expenses.
Determining Ownership of the Family Home
Often the family home is the most important asset that a family owns. Before you can decided what to do with the home, you must first determine who has an interest in the property. If the house is entirely community property then it should be divided equally between husband and wife. If one spouse has a separate property interest in the home, then that spouse would most likely be entitled to a greater share.
Community Property Presumption
In California, there is a presumption that property acquired during the marriage is community property and each spouse is entitled to an equal share upon divorce. However, in the case of the family home, this presumption may not apply if title to the property is not in joint names. Often, a house is purchased during the marriage and only one spouse’s name is on the title. The spouse whose name is on the title may try to claim that the entire property is their separate property and the other spouse does not have an interest. This can be challenged by proving that the mortgage was paid during the marriage using either spouse’s income, which are community earnings, or that the down payment on the home was made with community savings. To avoid this result the disadvantaged spouse has to prove that there was a breach of a fiduciary duty and the Court should treat the house as community.
Title to the Family Home
Sometimes, one spouse who has bad credit, is convinced to allow the other spouse to take title to the house so that they can qualify for a loan. Should this be your case, you will have to prove to a court that your spouse breached their fiduciary duty owed to you regarding the control of community property and to the financial institution from which they obtained the loan.
Another common situation is where one spouse owns a house prior to marriage. During the marriage the title remains in that spouse’s name but the outstanding mortgage is paid with community earnings. The spouse who is not on title may still have a community property interest by virtue of the mortgage payments made with community earnings. This relief is known as a “Moore-Marsden” interest, which are the two cases that establish the formula for calculating the community interest. When, over the time of your marriage, you have contributed substantial amounts of community earnings to pay off a mortgage to property titled only in your spouse’s name, have refinanced a loan for the house, or have made significant improvements, you will have a “Moore-Marsden” interest.
Dividing the Family Home
Taking into consideration loan qualification and payment, there are three options that you and your spouse should consider:
- You can buy out the community interest share owed to the other spouse.
- You can put the house up for sale and divide the proceeds from that sale.
- You can leave the house in a joint title for a limited period of time and sell it at a later date. This deferred sale is called a “Duke Order” and the court can only order a deferred sale in very limited circumstances, generally when it is economically feasible.
Buying Out Your Spouse’s Interest in the Family Home
There are several ways to buy out a spouse’s interest in the family home.
- You can qualify for a new loan based on your own income.
- You may convince your spouse to accept an installment note secured by a deed of trust on the home.
- You can buy out your spouse’s community interest in the house in exchange for a release of spousal support.
- You can borrow from your retirement plan, should you have one, to finance the buyout.
- You can elect to keep the house in exchange for assets of equal value that you give to your spouse.
Epstein Credits and Watts Charges
Often after separation one spouse moves out of the family home while the other spouse stays in the home with the children. The out-spouse, usually the husband, may offer to maintain the status quo by continuing to pay the mortgage payments and other payments such as property taxes to maintain the property. In such a situation the in-spouse may be required to reimburse the out-spouse for mortgage payments. The out-spouse paying the mortgage payments may be entitled to what are called “Epstein credits” because they are paying a community debt with their separate property earnings. The in-spouse will not be liable for reimbursement if the spouses entered into an agreement to waive such reimbursements or the mortgage payments were a form of child or spousal support.
Another consequence is that if the reasonable rental value of the family home is more than the mortgage payments, the in-spouse may be required to reimburse the community for the difference in these payments between the date of separation and the date of trial. These are called “Watts charges.” Where one spouse has the exclusive use of community assets during the date of separation and trial, that spouse may be required to compensate the community for the reasonable value of that use.
CALL NOW TO MAKE AN APPOINTMENT FOR A FREE CONSULTATION
For more information on community property and marital assets, click on one of the following links: