More often than not, the house (or marital residence) owned by one or both
of the married parties represents the primary, if not only, substantial
marital asset. The value of the marital residence is typically measured
by the "equity" in the property, or the fair market value of
the property less the balance of any outstanding mortgage or line of credit.
Under New York's law of
equitable distribution, both parties are entitled to an "equitable" share of the equity
in the marital residence. Assuming the property was acquired during the
marriage, and neither party can demonstrate that any separate property
was utilized towards the purchase of the property, the Court is likely
to divide the value of the property equally between the parties. But how?
There are four common methods in which to divide the value of the marital
residence, which can be done by agreement between the parties or order
of the Court after a hearing.
1. The property is sold on the open market, and the net proceeds is divided
equally between the parties, after payment of broker's commission,
satisfaction of outstanding mortgages and liens, and payment of usual
and customary closing costs;
2. One party buys the other party out of the property, by paying them
one-half of the net equity of the property. This may also require a pay-off
or refinance of the existing mortgage to remove the other party's
name from the mortgage;
3. One party keeps the house, and the other party keeps other marital
asset(s) (for example, bank accounts, vehicles, retirement assets, a business
interest) having a similar net value as the equity in the marital residence
so that each party receives assets having comparable values; or
4. The custodial parent remains in possession of the marital residence
until the youngest child completes high school (or until some other triggering
event), at which time the house will be placed on the market for sale,
and the net proceeds divided between the parties, as in option #1, above.
This is referred to as an "exclusive occupancy" arrangement,
and will require the custodial parent to pay all the carrying charges
for the property (mortgage, taxes, insurance, utilities, etc.) During
the period of exclusive occupancy and until the property is sold. The
custodial parent making these payments should be entitled to a credit
for payments made during the exclusive occupancy in reduction of the principal
mortgage balance at the time the property is sold, and will be able to
claim available tax deductions for payment of mortgage interest and property taxes.
Each of these four method have their pros and cons, benefit and pitfalls,
which should be fully explored with experienced legal counsel, as well
as tax professionals.
For more information on divorce and property division, please contact Wisselman, Harounian & Associates today.
