So what happens to a home when a couple decides to split? Below is a quick overview of the processes and considerations that the soon-to-be-divorced must know:
How are properties divided?
Florida requires real estate assets to be equitably divided between divorcing couples. Do note that “equitably divided” does not necessarily mean a 50/50 split. The division of real assets is determined by a variety of factors, including the length of the marriage, financial capability, current liabilities, and even wrongful conduct by either spouse.
Ideally, couples should agree on the asset division between themselves or through mediation via their lawyers. If they cannot, the court will have to decide on the matter—which may not always result in a satisfactory ruling for either party.
Usually, the judge will order the couple to sell the property and divide the proceeds accordingly. One spouse might also be awarded the home, provided that they buy out the other’s financial stake in the property. In either case, equitability is the main consideration.
What gets divided?
Not all properties will be divided in a divorce proceeding—only those that were acquired during the marriage. This means that any real estate bought before the marriage will be considered as separate rather than marital property. In some cases, even properties acquired during the marriage are exempt, such as inherited or gifted real estate.
However, if the non-owning spouse contributes to the property and helps grow its value, they are entitled to split the difference. Say, for example, that the husband bought a home before the marriage but his wife contributes financially to its renovation. Its pre-marriage value would be exempt, but the subsequent increase in value would not.
What happens to the mortgage?
Unfortunately, dissolving a marriage won’t dissolve the mortgage on a marital home. In many cases, an ex-spouse keeps the house in exchange for paying off the balance on the mortgage. If they miss payments, however, the other ex-spouse might still be on the hook if their name is still on the contract. Experts often advise divorcing couples to either sell the property to pay off the mortgage or refinance it so that only one person is financially responsible for the balance.
When should properties be sold?
Divorcing couples won’t get a free pass from Uncle Sam, either. Upon selling their home, they will have to pay a capital gains tax just like everyone else. However, when a couple sells the house determines how big their tax bill will be. If they sell the house before their marriage is dissolved, they can exclude up to $500,000 in profit. If they sell it after the divorce, that number is halved to just $250,000.
Of course, the information above is but an overview of the process of dividing properties during a divorce. A reputable real estate agent in Palm Beach, FL will always advise their clients to seek legal counsel from a divorce attorney.