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Divorce: Should We Sell the House?

Denise Erlich Image avatar by Denise Erlich

A house, divorce

During a divorce, complex issues related to the marital residence often arise. Whether one spouse keeps the house or both spouses decide to sell, it raises financial concerns about marital assets. Many couples consult a divorce attorney to discuss concerns and address legal questions that impact their interest in the house.

Who Gets the House?

When a house is part of marital assets, a divorce raises many legal concerns. In some cases, one spouse may want to keep the marital residence, so they agree to buy out the other spouse. This is usually accomplished by refinancing the existing mortgage and placing the new mortgage in the sole name of the spouse who wants to keep the house. However, a refinance may present challenges if one spouse isn’t employed, or if there isn’t sufficient equity in the house to justify the refinance with the bank. In other cases, neither spouse may want to keep the house, so they agree to sell the property to avoid the costs of maintaining two homes. In both scenarios, the financial impact on each spouse can be explained by a divorce attorney who understands state laws governing marital assets in a divorce.

Spouses may agree to maintain joint ownership in the home, agreeing that one spouse continues to live in the the home until a certain date. While a post-divorce, joint ownership agreement can create challenges, it does present a good way to preserve equity, especially during a declining housing market.With this type of agreement, a divorce attorney can establish rules and time lines to avoid future disagreements when it’s time to sell the house.

If both spouses can’t reach an agreement on who gets the house, or what happens to the marital asset, the court may choose to force the sale of the property, regardless of what the parties’ want to do. The court may also order that the house be put up for auction. If these actions are taken, both spouses will likely take a big hit on the sale price of the home and division of any profits.

Illinois Laws on Marital Assets

In Illinois, marital property is divided equitably by the courts, but not always equally. For purposes of distributing property in a divorce, courts look at what constitutes marital property versus the separate property of each spouse.

Marital Property

According to Illinois laws, all property that qualifies as “marital property” is subject to equitable distribution by the court. Marital property is defined as property acquired by either spouse after the marriage and before a judgment of dissolution of marriage. This includes any separate property transferred into some form of co-ownership between the spouses. Marital or non-marital property is not determined by the name in which property is held.

Regardless of whether title is held by one or both spouses in a co-ownership, like joint tenancy, community property, or tenancy in common, property acquired during the marriage is considered marital property by the court, and legally both spouses have an interest in the property. The marital property and marital obligations, including debt incurred during the marriage, is distributed equitably between the parties.

If one spouse received the property alone as a gift or inheritance, it remains that spouse’s own separate property rather than marital property. In an Illinois divorce, each spouse gets to keep his/her separate property.

In many marriages, spouses commingle marital and separate property, especially when paying for household and childrens’ expenses. The couple may move into a house that was owned by one spouse before marriage, then begin joint payments on the mortgage, household expenses, maintenance and repairs. One spouse may put separate money or money from an inheritance into a joint bank account. As common as these situations are, they often create major complications during a divorce. If there is no prenuptial agreement that governs separate property, a divorce attorney may be necessary to untangle the complexities of commingled assets.

Contributed Property

Courts often allow reimbursement for contributed property, separate property that was contributed to marital property by one spouse. If a husband contributes a financial inheritance, considered to be separate property, to the purchase of a marital home held in joint tenancy, the husband’s separate inheritance funds convert to marital funds. If the couple divorces, the wife can be reimbursed for her contribution to the marital home.

Courts also allow reimbursement for personal efforts contributed by one spouse to separate property of the other spouse during marriage. For example, if the husband does all of the repairs on a home the wife owned prior to marriage, the homeowner spouse may have to reimburse the value of this effort to the marital estate. In either case, the court will only allow reimbursement for contributed property with clear and convincing evidence provided by a divorce attorney.

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