By: John P. Paone, Jr., Esq. and Megan S. Murray, Esq.*
1st century Roman author Pliny the Elder coined the phrase “home is where the heart is.” For parties going through a divorce, the task of resolving what happens to the marital home can be an emotional and heartwrenching experience. One need only harken back about 20 years ago to the case of a misguided divorce litigant who attempted to literally divide the marital home in half…through use of a saw.
Addressing the disposition of the marital home requires consideration of many factors. First, the parties must come to an agreement as to whether the home will be sold to a third party or, alternatively, whether one spouse will buy out the other’s interest in the home. If the parties agree to sell the home, prudent sellers will want to consult with a listing agent who is knowledgeable about the market in order to arrive at a reasonable listing price.
In connection with the sale, divorcing parties must also consider the potential tax liability resulting from the sale of a principal residence. Finally, the parties must agree on how to divide the proceeds of a sale – as under New Jersey law, the division of assets is not automatically 50/50.
When the parties choose not to sell the marital home, the question then becomes who will buy out the other. When the parties are not able to agree, the Court has to step in to decide this issue. When there is agreement for one spouse to buy out the other’s interest, an appraisal of the residence will be necessary, unless the parties can agree upon a value of the home.
The transfer of the marital home from one spouse to another incident to a divorce is not a taxable event. However, parties need to have an understanding of the tax basis of the home as a substantial unrealized capital gain may result in a significant tax liability to the party who receives the home and then sells it after the divorce.
Yes, the disposition of a marital home can be an emotional event. If you are going through the divorce process, you should discuss with your attorney the many issues which need to be considered in connection with a marital home.
*John P. Paone, Jr., Esq. and Megan S. Murray, Esq. are family law attorneys and partners with the Paone Zaleski & Murphy, with offices in Red Bank and Woodbridge, New Jersey.