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Deciding who gets to keep the house is only the first step

For many Alabama residents, the most valuable asset they will own in their lifetime is their family home. Understandably, then, when a couple gets divorced, the house is often one of, if not the top, pieces of marital property that must be divided between the spouses. Yet, it is not as simple as just deciding which party will keep the home.

As with the couple’s other property obtained during the marriage, the marital home is typically divided according to equitable principles. This means that the court will attempt to arrive at an overall property division arrangement that is fair for both parties. Because the house is often the most valuable asset the couple owns, special attention should be given to how it is managed in the divorce.

For example, if one party decides to keep the home, the home should be appraised, and the spouse who will continue living in the home needs to make a payment to account for the other spouse’s share of equity in the home. In these circumstances, the home mortgage should also be refinanced in order to remove one spouse’s name from the loan, although this can be tricky depending on the credit ratings of the spouses.

On the other hand, if the parties decide they want to sell the home, the couple should agree on a listing price and a plan for dividing the proceeds and expenses of the sale. There may be different considerations involved depending on the tax consequences, as well as in considering whether the house can be sold for a profit or a loss.

Ultimately, the most important thing is for these issues to be addressed in the divorce, rather than having to deal with them down the line when it may cause more conflict. Accordingly, individuals should work carefully to examine their personal circumstances and how to deal with the house during a divorce.

Source: Reuters, “Splitsville? How to divide property in a divorce,” Geoff Williams, Oct. 7, 2013