How will the family home be split in the divorce? This is probably the most common divorce question that we get from our clients when it comes to Community Property and Divorce. Answer: it depends. Clients will sometimes Google this question prior to meeting with our attorneys and feel as though they know the answer. However, it’s a bit more complicated than that. This is because Idaho is a unique state. Idaho is one of only nine states that has adopted the “community property” laws for property division. Although there are some exceptions, community property law sets forth a presumption that all property acquired during the marriage is split 50/50 unless the parties agree on another arrangement. Because the family home is typically the most valuable asset that a couple owns, it is typically the most contentious issue in divorce.
Community Property – What Does it Mean?
In a divorce, all of the community property will be divided equally between spouses. Property is not limited to just your family home, but also includes businesses, ownership interests, investments, wages, earnings, income, savings, retirement accounts, real estate, raw land, bonuses, dividends, IRA’s, pensions, brokerage accounts (i.e., stocks, bonds, mutual funds, cryptocurrency, and other financial assets), cars, boats, furniture, and any other property. As you might expect, splitting up the community property can get complicated. Although it’s fairly easy to split the cash in your bank account, it gets a little more difficult when dealing with real property and other high-valued tangible assets.
When it comes to your home, you generally have three options: sell the house, agree to a buyout, or agree to a deferred sale. If neither of you want to keep it, you can sell it and split the proceeds. If you want to keep it, the other party needs to get something of equal value in exchange. For example, you can give the other party other assets in exchange or refinance the home and give the other party their share of the equity. And lastly, you can defer to selling the home and co-own the property until it’s time to sell.
Transmuting Separate Property into Community Property
Property that is owned prior to the marriage or acquired by gift or inheritance during the marriage is usually considered separate property. In other words, when a person buys a home before he or she is married, the home is usually considered his or her own separate property and is not subject to division. However, there are exceptions to this rule. For example, if one spouse owns a home prior to the marriage and, after getting married, conveys title in joint tenancy to both spouses as husband and wife. By doing so, the spouse gifts the home to the marriage, and it becomes a community asset. Another way to transmute the home into community property is by refinancing the mortgage during the marriage.
If you add your spouse’s name on the title, you are likely giving him or her 50% ownership rights. Lastly, if the value of the home increases during the marriage, the non-owner spouse may be entitled to a portion of the increased value if his or her efforts are used to help maintain or improve the property, or if the non-owner’s spouse’s funds are used to pay down the mortgage. Community property can also rear its ugly head in terms of vehicles. Even a vehicle titled solely in your
name can be considered a community asset if it was obtained during the marriage or paid for with funds earned during the marriage. A common complaint we hear from clients is that they owned a vehicle prior to the marriage, which they then traded for a new vehicle titled in their name only, and thus should be considered separate property. In this scenario, it is only separate property if there were no other funds used during the transaction. For example, if the old vehicle was worth $2,000.00 and you got the new vehicle for $2,000.00, the vehicle most likely remains separate property. However, if any marital funds went toward the transaction, it could be classified as community property, or at least part of it.
Statistics show that couples now are getting married later in life. This means that spouses are often coming into the marriage with more property, which can become subject to these complex rules. Prior to getting married, a couple that is simply cohabitating maintains their separate property. However, when they get married, their separate property, including their homes, can transform into community property, or at least part of it. One way to protect yourself and your home is by having a prenuptial or postnuptial agreement. You can indicate in a prenuptial or postnuptial agreement that you want to treat your home as separate property, even if you refinance it and use your post-marital income to pay down the mortgage.
Call Gordon Delić & Associates
Dividing community property is a difficult and complicated matter. The attorneys at Gordon Delić & Associates can ensure that you are receiving the value of the property you are entitled to. We can also help protect your property – including your home – by drafting either a prenuptial or postnuptial agreement. These agreements should address what will happen to the home if you get a divorce. Call us today for a free consultation!