In Colorado, the primary caregiver often gets the house in a divorce. The courts may allow the person with the children to stay in the house because there is a belief that it is in the best interest of the children. However, this is not always the case and the issue of who keeps the house is often one of the issues the court must decide.
If you want to keep your house in a divorce, read on:
What Happens to the House in a Divorce?
What happens to the house in a divorce is an issue with great economic and emotional significance.
There are two time periods to consider when thinking about what may happen to the house in a divorce – (1) who should stay in the house temporarily between the time the divorce is filed and final orders, and (2) what will happen to the house at the time of final orders?
If there are school-aged children involved, there may be compelling reasons to argue that the children and primary caretaker should stay in the house at least temporarily. Courts generally want to preserve the status quo during the pendency of the case and may be persuaded that having the children stay in the house is a way of preserving the status quo until final orders.
Although there is no law saying the person who receives possession of the house temporarily gets to keep it as part of the divorce, as a practical matter, if a person wants to receive the house in the divorce ultimately, it may be helpful for them also to receive possession of the house temporarily.
Who Will Decide who Keeps the House?
Ultimately, if the parties cannot agree, the judge will decide what happens to the marital home in a divorce. In a contested divorce, the court must determine how to equitably divide the parties’ assets and debts. In making this determination, the court will consider each person’s wishes regarding keeping the house, whether the primary caretaker of the children wishes to keep the house, and whether there are sufficient assets for one person to “buy out” the equity interest of the other or whether the house must be sold in order for each person to receive their equity.
How Does a Colorado Court Decide who Gets the Home?
The first issue the court must decide is whether the house is a martial or separate property interest. Under Colorado law, the trial court is required to set apart to each spouse his or her non-marital property and then divide the marital property
If the house is separate property under C.R.S. § 14-10-113, the court will set aside the separate property before dividing the marital estate. A person may have a separate property interest in their home if they owned the home prior to the marriage, continued to keep it separately titled in their name, and paid the mortgage without contribution from the other spouse.
Another way a person might have a separate property interest in their home is if they inherited the property or received it as a gift and did not jointly title the property with their spouse.
Clients frequently ask whether they have a separate property interest in the home if they used separate property, such as an inheritance, to contribute to the down payment or pay the mortgage or home improvements. This analysis is fact-specific, depending on the case. Still, Colorado courts have ruled that property that is placed in joint tenancy by a spouse during the marriage reflects an intent by the donor spouse to make a gift to the marriage. In re Balanson, 25 P.3d 28, 37 (Colo. 2001) (property placed in joint tenancy during the marriage is presumed to be marital property absent clear and convincing evidence to the contrary).
Options for Splitting the Home in a Divorce
The two most common options for dealing with the house in a divorce are for the court to allocate the house to one person and have them buy out the other’s equity interest as part of the overall equalization of assets and debts, or order that the house be sold, and the proceeds divided.
1. Sell the House and Divide Proceeds
In some cases, neither party wants to keep the marital home and the parties agree that it should be sold and the process divided. This is the simplest way to resolve the issue of who keeps the house because the court does not have to determine the present value or decide which person should keep the house after the divorce is final.
In cases where the house will be sold, there may be reasons to list the house and finalize the sale while the case is pending. In this instance, the parties will generally agree to place the proceeds from the sale in a separate account to be divided as part of the overall division of assets when the divorce is finalized.
2. One Person Keeps House and Other “Buys them Out in Cash”
If the home is not going to be sold, the court will need to determine the present value so that it may then determine how much equity each person has in the home. To determine the present value, parties may decide to obtain an appraisal for divorce purposes (which differs from an appraisal for purposes of refinancing or property taxes), or each person may testify as to their opinion of the present value.
Once a value is determined, the court will deduct liabilities, such as the remaining mortgage debt, and will then decide how to divide the remaining equity, which may be split 50/50 or divided in another proportion depending on the particular facts of the case.
The person keeping the house will be required to buy out the other person’s equity with cash, which may come from refinancing the property, obtaining a second mortgage, or receiving a loan. If a person is seeking to keep the house in a divorce, they should consider whether there are available sources of financing for them to buy out the other person’s equity interest.
3. One Person Keeps House and Other “Buys them Out with Other Assets”
Another option for dividing the equity from the marital home is that the person keeping the home buys out the other person with non-cash assets, such as retirement assets or other real estate.
Before the party keeping the home decides to buy out the other person with other assets, they should consult with their tax advisor to determine any tax consequences that may result from such a transfer.
Financial Considerations
1. Can you afford the house?
A critical financial consideration in deciding whether to advocate for keeping the marital home is whether you will be able to afford the associated costs after the divorce is finalized. In addition to the mortgage payments, parties should consider other costs of owning the home, including property taxes, maintenance, repairs, and any fees that may be associated with owning the property.
2. Common taxes related to Marital Home vs. Investment Property
There may be tax considerations associated with keeping the marital home that should be discussed with a tax advisor. Such considerations include the ability to deduct mortgage interest and whether there will be capital gains at the time of sale.
Whether you will keep your house after a divorce is a complicated question with many variables that come into play. Please contact the team at Griffiths Law to discuss your situation and how you might be able to keep your house in a divorce.
Jennifer Schaffner is an attorney at Griffiths Law PC. Schaffner’s practice focuses on family law and appeals. She believes in finding creative solutions to cases whenever possible, but if going to court is inevitable, she knows how to advocate for her clients’ best interests.