By Warren R. Shiell
The following information is specific to California.
How do we determine the value of the house?
If you decide to either to buy out the other spouse’s community interest in the house or to exchange it for another asset, you will need to know the equity and financial value of the house. The equity in the house is equal to the house’s fair market value less any debts connected to the house such as mortgages and liens. The fair market value of the house is usually assessed by a certified real estate appraiser. The parties may agree to jointly retain an appraiser to keep down costs. A certified appraiser who knows the local market may provide a more accurate appraisal than the local realtor. Sometimes couples place the house on the market to see of anyone makes any offers.
It is important to note that if the Court is asked to calculate each spouse’s share in the house it will only consider the equity value. The court will not consider other costs that might reduce future sale proceeds such as closing costs, sales commissions and tax bills because those costs are not considered “immediate and specific.” FN5. Therefore, if the fair market value of the house is $500,000 and the balance of all outstanding mortgages is $200,000, the equity value of the house is $300,000. If this is all community interest then each spouse will be entitled to $150,000.
If you are trying to negotiate a settlement, you may wish to argue that the financial value of the house should be considered after taking into account taxes after sale and closing costs. This is important because once you get divorced and awarded the house you are only entitled to a $250,000 exemption on any gain. Therefore what may look like a fair bargain may not seem so fair after you factor in taxes. Consider this example: the equity value of the family home is $500,000 and the equity value of stocks and shares is also $500,000. Is this a fair exchange if the husband keeps the stocks and shares in exchange for the house? It depends. Assume that the shares have a high tax basis so that if they are sold the husband is liable for $100,000 of gain. The wife on the other hand is liable for $250,000 gain if she ever decides to sell the house. Is this still a fair exchange?
(read more on our website)
© 2011 Warren R. Shiell. Warren R Shiell is a Los Angeles Divorce and Family Law attorney. All rights reserved. The information contained in this blog/website is an "Advertisement." It is for informational purposes only and shall not constitute legal advice. Nothing in this Website shall be deemed to create an Attorney-Client relationship. An Attorney-Client relationship shall only be created when this office agrees to represent a Client and a Client signs a written retainer agreement.
For more information visit www.la-familylaw.com
Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell
Call for a free consultation now 310.247.9913.
Divorce and Money
Los Angeles Family Law Attorney
Divorce Lawyers|Attorneys Los Angeles, Beverly Hills
California Prenuptial, Prenups
Showing posts with label separate. Show all posts
Showing posts with label separate. Show all posts
Sunday, October 02, 2011
Saturday, October 01, 2011
Family Home in Divorce Part III
By Warren R. Shiell
The following information is specific to California.
What are the options for dividing the house?
There are three options if you are trying to reach a settlement:
(a) One spouse buys out the community interest share of the other spouse;
(b) The house is sold and the proceeds are divided; and
(c) The house remains in joint names for a limited period of time and is then sold to the other spouse or is put on the market.
During economic downturns when house prices are depressed couples increasingly turn to the last option.
But there is a catch. If you litigate, option (c) is called a deferred sale order (or a “Duke Order”) and the Court can only order a deferred sale in very limited circumstances where it is in lieu of child support and economically feasible. FN3.
Should I keep the house or exchange it for other assets?
It is very important to consider the financial as well as the legal realities of electing to keep the house. It is used to be very common where the husband owns a business to suggest that the wife keeps the house and the husband keeps the business. Before even getting into whether this is a fair exchange of assets of equal value, one has to consider whether the spouse who wants to keep the house can afford to do so. Often the spouse who has primary custody of children wants to stay in the house for the sake of the children but this may not be economically possible. The spouse who wants to stay in the home should sit down and work out a budget. They should estimate housing costs and compare this with their estimate earnings from employment, support and other sources. Housing costs are more than just mortgage and property taxes and one should factor in utilities, repairs, insurance, fees etc. You may also be entitled to mortgage interest deduction relief lowering your costs. If you can still afford to stay in the house, only then should you consider this option.
(read more on our website)
© 2011 Warren R. Shiell. Warren R Shiell is a Los Angeles Divorce and Family Law attorney. All rights reserved. The information contained in this blog/website is an "Advertisement." It is for informational purposes only and shall not constitute legal advice. Nothing in this Website shall be deemed to create an Attorney-Client relationship. An Attorney-Client relationship shall only be created when this office agrees to represent a Client and a Client signs a written retainer agreement.
For more information visit www.la-familylaw.com
Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell
Call for a free consultation now 310.247.9913.
Divorce and Money
Los Angeles Family Law Attorney
Divorce Lawyers|Attorneys Los Angeles, Beverly Hills
California Prenuptial, Prenups
The following information is specific to California.
What are the options for dividing the house?
There are three options if you are trying to reach a settlement:
(a) One spouse buys out the community interest share of the other spouse;
(b) The house is sold and the proceeds are divided; and
(c) The house remains in joint names for a limited period of time and is then sold to the other spouse or is put on the market.
During economic downturns when house prices are depressed couples increasingly turn to the last option.
But there is a catch. If you litigate, option (c) is called a deferred sale order (or a “Duke Order”) and the Court can only order a deferred sale in very limited circumstances where it is in lieu of child support and economically feasible. FN3.
Should I keep the house or exchange it for other assets?
It is very important to consider the financial as well as the legal realities of electing to keep the house. It is used to be very common where the husband owns a business to suggest that the wife keeps the house and the husband keeps the business. Before even getting into whether this is a fair exchange of assets of equal value, one has to consider whether the spouse who wants to keep the house can afford to do so. Often the spouse who has primary custody of children wants to stay in the house for the sake of the children but this may not be economically possible. The spouse who wants to stay in the home should sit down and work out a budget. They should estimate housing costs and compare this with their estimate earnings from employment, support and other sources. Housing costs are more than just mortgage and property taxes and one should factor in utilities, repairs, insurance, fees etc. You may also be entitled to mortgage interest deduction relief lowering your costs. If you can still afford to stay in the house, only then should you consider this option.
(read more on our website)
© 2011 Warren R. Shiell. Warren R Shiell is a Los Angeles Divorce and Family Law attorney. All rights reserved. The information contained in this blog/website is an "Advertisement." It is for informational purposes only and shall not constitute legal advice. Nothing in this Website shall be deemed to create an Attorney-Client relationship. An Attorney-Client relationship shall only be created when this office agrees to represent a Client and a Client signs a written retainer agreement.
For more information visit www.la-familylaw.com
Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell
Call for a free consultation now 310.247.9913.
Divorce and Money
Los Angeles Family Law Attorney
Divorce Lawyers|Attorneys Los Angeles, Beverly Hills
California Prenuptial, Prenups
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