For divorcing couples there are many items that have to be divided during the divorce process, through what the legal community calls “equitable distribution.” In the majority of cases that the lawyers at our family law and divorce law firm handle, the item of most significance, which also typically has the highest value, is the parties’ marital home. As a New Jersey family law attorneys, I routinely deal with issues surrounding the division of property during the divorce process, and many individuals are not aware of their options pertaining to same until they have had the benefit of meeting with and discussing this with an experienced attorney. Parties often have the unrealistic goal, which is especially true if the parties have minor children, that one of them will maintain the home after the divorce. What they fail to realize is that in the majority of cases it is simply impossible to go from having one (1) home supported by two (2) incomes, to now supporting that same home on one (1) income alone. Unless the parties have significant assets, this is usually not feasible. This is yet another reason that your divorce lawyer should only practice on divorce law here in New Jersey. After all, what is more important that your home.
In this article we will explore the various options an individual may have in resolving any equitable distribution issues concerning their marital home. Please note that this list is not exhaustive, as one can be creative and come up with a unique solution that may work with the facts of your particular case and help resolve the matter. Rather, herein I will explore the most common options and scenarios that you are likely to encounter.
In the divorce context, equitable distribution means the distribution of property and debt obligations used by a court when dividing marital property during the proceeding. Equitable distribution does not mean “equal” division, but instead a “fair” division. The doctrine of equitable distribution is used to look at the future financial situation of each spouse after the termination of the marriage. In New Jersey, equitable distribution has been defined as the division of marital assets in a manner that is fair but not necessarily equal.
The purpose of equitable distribution is to divide property acquired during the marriage in a manner that is just under the circumstances of the case. Painter v. Painter, 65 N.J. 196, 209 (1974). In other words, a court is required to make an equitable, not an “even”, division of marital property, and this allocation is to be made in accordance with the non-exhaustive list of statutory factors prescribed by N.J.S.A. 2A:34-23.1. In every case, the court shall make specific findings of fact on the evidence relevant to all issues pertaining to asset eligibility or ineligibility, asset valuation, and equitable distribution, including specifically, but not limited to, the factors set forth in said statute.
Marital property is defined as the money and the things that were acquired during a marriage and thus this it is subject to equitable distribution. This does however exclude items that were given to one party as gift or something that was inherited. A marital home is the residence/property where the parties primarily resided during the marriage and it is typically a piece of real estate that was purchased during the course of the marriage. This definition is not all encompassing, and once again, it really depends on the actual facts of your case.
Now that you know a little bit about equitable distribution and what a marital home is, let’s take a look at the various options you have during a divorce process to equitably distribute your marital home. In most divorce cases, there are three (3) basic options for distributing the marital home.
The first option is the most common one and is typically the option a Judge will order if the parties cannot mutually agree on one of the other options. This option would be to list the marital home for sale with an agreed upon realtor, which is done as soon as possible. The parties are usually free to choose the realtor and also free to choose the listing price. In more contentious cases, the parties or their attorneys can exchange the names of three (3) realtors and pick one (1) from the list. If the parties cannot agree, then the Judge can ultimately appoint a realtor. The parties will then usually differ to a listing price recommended by the realtor and list the home at said price, lowering the asking price upon any reasonable recommendations of the realtor. In the event the parties cannot agree on a list price or they do not agree with the realtor’s suggestion, for whatever reason, then they are free to obtain an appraisal of the home and have it listed accordingly.
Once the home is sold, the parties will typically each share in the net proceeds of the marital home, if any, by splitting same 50/50. This means any remaining monies that would be left for the parties after all closing costs, mortgages, fees, offsets, etc. are paid. As mentioned above, this might not always be a 50/50 split depending on the particular facts of a case, but it is customarily agreed, or ordered by a Judge, that the net proceeds from the sale of the marital home be split equally between the parties. This is the most common option utilized by parties in the divorce process.
The second option is refinancing the home to remove the other party’s name from the deed and mortgage and any liability they may be exposed to concerning the property, which allows the other party to keep the property after the divorce as their sole and exclusive residence. This scenario is the one that most parties would like to accomplish, however, as mentioned in the beginning of this article, this is the most difficult option unless the parties are financially well off. By way of an easy straight forward example, if the marital home had a value for equitable distribution purposes, which would usually be determined by an appraisal, of $500,000, and the parties owed a total of $300,000 on their mortgage, this would leave a total equity of $200,000, which would need to be equally divided between the parties so that they are each entitled to $100,000.
The individual who wanted to “buyout” the other party’s interest in the home and refinance same would need to refinance for at least $400,000, plus closing costs, to pay off the existing mortgage ($300,000) and remove the other party’s name from same, and to pay the other party their equitable share of the value of the home ($100,000). A party typically has anywhere between ninety (90) and one hundred eight (180) days from the date of the divorce judgment to complete the refinance, but this can be negotiated by the parties in their settlement agreement, or a specific time frame can be ordered by the Judge.
The third option is the least common of the three, but still popular enough and asked about frequently when the parties have minor children that it is worth mentioning. This would encompass keeping both parties on the deed and mortgage, not changing either, and allowing one (1) of the parties to stay in the home until the children reach a certain age, i.e. the youngest child turns eighteen (18), graduates from high school, etc. This scenario is almost always done by consent as a Judge would rarely, if ever, make one party wait to receive their share of the equity in the home. As such, in order to accomplish this both parties would have to be willing to agree to same knowing the pros and cons of this scenario. Obviously some of the pros would be allowing the children to stay in the home for a period of time with as little disruption to their daily lives as possible, keeping relatively the same financial burden on the party staying in the home so they can afford it, etc. Some of the cons would be continued exposure for the party who no longer resides there on the liability associated with the property and mortgage, although the party who remains could agree to indemnify and hold the other harmless concerning same, and having to wait to receive their share of the equity in the home, which is often needed by a party in order to move on with their own life and purchase a residence of their own. This situation is also very difficult to complete if both parties want to completely move on.
As practicing New Jersey divorce attorneys we deal with these types of issues on a reoccurring basis, are equipped to guide you through your divorce and can help educate you as to your options and what you may be entitled to.
If you have a question concerning your divorce, equitable distribution or your marital home, do not hesitate to contact our law firm to further discuss your rights and how we can help you.