Women's Finances: Home Sales

Home sales are at a 10-year low in many communities around the country. That’s not a problem if you aren’t planning to sell your home. But if you are divorcing, sluggish home sales can be a huge obstacle in dividing up your assets. Your home likely is the largest asset that you and your spouse own, and it is also the most difficult to divide. You have three choices in divorce: keep the house, sell it or continue joint ownership.

1. If you decide to keep it:
Make sure you can afford the costs associated with your house, including maintenance, repairs, home ownership association fees, gardeners and other household expenses. You may be able to afford the mortgage, but the other expenses could break your budget.

2. If you and your co-owning spouse decide to sell:
You will share the costs of sale and you can exclude up to $500,000 of capital gains. If on the other hand you become the sole owner of the house in the divorce settlement, when you eventually sell it you’ll have to pay the entire cost of sale and capital gains liability, and you’ll only be able to exclude $250,000 of gain. Anything you pay to your ex for his interest in the home won’t reduce the gain when you sell the home down the line. Since owning a home can be an expensive proposition for a newly single individual, many divorcing couples decide to sell. But if today’s sluggish market precludes a speedy sale, you may decide to own the home jointly for a few years after the divorce. Specify in your agreement when the home will be sold, for example, when the children are grown, and split the proceeds when that time comes.
 
3. If you decide to own the home jointly for a few years:
You must get a written agreement or court order granting you exclusive use of the residence and keep your ex’s name on the deed.  The house will then be considered your ex’s primary residence as well, and he will preserve his ability to exclude $250,000 of gain when the house is sold. In divorce you’ll end up with far less than you had before, so decide what is most important to your future. If you give up retirement assets to keep the home, develop a plan to build a nest egg for later in life. A bit of advance planning goes a long way.  



Ginita Wall, CPA, CFP® is a Certified Divorce Financial Analyst and director of the Women’s Institute for Financial Education. She is author of eight books, including "The ABCs of Divorce for Women," and “150 Ways to Divorce Without Going Broke.”