Going through a divorce can be emotionally challenging, but property division is a major issue that needs careful attention. The marital home is not just an important financial asset, but it also has emotional significance. Deciding what happens to your house is often one of the most complex aspects of a divorce settlement. Understanding how New Jersey courts handle this issue can help you prepare for future proceedings.
Is the home really marital property?
The first step in the process is determining whether your marital home will become involved in asset distribution. Before courts decide whether to divide your property, it must fall under the marital estate. In a divorce, the court will sort your combined assets into either marital property or separate property.
Here is the difference between the two:
- Marital property: This generally includes assets you received or purchased during the marriage. For example, a home purchased after the wedding using marital income is marital property.
- Separate property: This includes property received via gift or inheritance. Additionally, this may also include assets you owned before the marriage. However, it may change to marital property if you used marital funds to pay fees, renovate or improve the home.
Even when a home started as separate property, marital contributions or home improvements can create a marital component.
What is equitable distribution?
In New Jersey, courts follow equitable distribution in divorces. This legal standard means that courts will not necessarily divide marital property in an even 50/50 split. Instead, the court aims to divide marital property in a way that is “fair.” They may take a closer look at the specific circumstances of your marriage.
The state considers several factors when deciding how to distribute the home. Some examples include your earning capacity, duration of your marriage and contributions to the marriage.
What are the options?
In New Jersey, there are typically three ways to handle marital home distribution:
- Sell the home, split the proceeds: The most straightforward method is to sell the home to a third party. The remaining “net proceeds” after paying off the mortgage and other fees will go to you and your spouse. You will receive funds according to your agreed-upon settlement agreement or a court order.
- Buy out the other’s equity: You or your spouse may retain full interest by buying out the other’s equity interest. You may do this by paying in cash, offsetting with other marital assets or refinancing.
- Deferred sale: In some cases, the court may delay the sale of the home. This is more common when your divorce involves minor children. Under this pathway, the delay may last until the children graduate high school or another milestone is reached.
If you are navigating a divorce, it is essential to appraise your home’s current market value. Consult with financial and legal professionals to understand the tax implications of your choices. While the process can be stressful, seeking advice is the first step toward a fair resolution.