Many times, a California couple’s largest financial asset is their family home.
The home might also be a place to which all parties have become attached emotionally.
On a related point, a Carlsbad couple’s children may see the home as a place of stability during what could be a difficult time for them.
These are reasons why during a divorce, a couple might disagree strongly about what to do about their family home.
More often than not, the family home will be community property, which is subject to California’s 50-50 division rules. Both spouses will be entitled to an equal share of the equity in the home. The question is how they will work this division out in practice.
What can I afford?
It can be very tempting for a person to want to fight for ownership over the family home for nonfinancial reasons. This is not always a bad thing. For example, a parent may be concerned about keeping the home for the sake of their kids.
However, to some extent, people have to think about what they can afford after the divorce.
Following a divorce, a person will not have the same income or assets, yet the home will cost the same.
The person may have to secure financing in their own name and take on the mortgage debt, and not necessarily with financial help from their ex.
Moreover, the new sole owner will likely be responsible for all property taxes, and they will also have to pay to insure and maintain the home. Someone going through a divorce has to be realistic about whether they could keep up financially if the court awarded them the family home.
Tax considerations are also important
On a related point, capital gains taxes generally do not apply to transfers of property during a divorce. However, if the person who takes the house wants to sell it later, they may have to pay taxes on the sale.
While there is a limited tax exemption for family home sales, they may not apply fully to many transactions in this state given the soaring land values here.
Californians who are going through a divorce should understand all of the legal alternatives when deciding on what to do about a family home. Doing so may help them achieve their ideal financial result.