How to Divide the Family Home in a California Divorce

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How couples can divide the family home in a California divorce. Written by a divorce attorney with over 25 years of experience.

Things You Will Need

It would be helpful to have a copy of the deed to your family home so that you both know exactly how the title to the home is held.

Step 1

For the sake of simplicity, I will assume that the family home is located in California and it was purchased and maintained with community funds so that the home is 100% community property.

In California, the family home is often divided in one of the following three ways:

1. The home is sold immediately and the net sales proceeds are divided equally between the parties. This will work if there is enough equity in the home to pay for the sales costs. (Equity means that the amount you can sell the house for is more than the amount owed on the house.)

2. If there is little or no equity in the home, couples may continue to own the house until the real estate market improves to the point where there is equity in the home. If you wait to sell the home, consider putting the title in the names of each party as "tenants in common". This form of title gives each of you the right to give away your share of the home to someone in your will. It is also important that you decide in advance:

a. Who will live in the house until it is sold.

b. What event or date will trigger putting the house up for sale.

c. What percentage of the net sales proceeds each of you gets once the house sells.

3. One spouse buys the other spouse out of their interest. For example, if the house is appraised at $150,000. and there is a mortgage of $50,000., the equity is $100,000. In this example, one spouse will have to pay the other spouse $50,000. in cash or trade. This could also be accomplished by having one spouse refinance the house (on their credit alone) and using the money to pay off the other spouse.

Happily, the transfer of the home (rather than its sale to a third party) has no tax consequences when it is part of a divorce settlement. But if one party gets the house, they also get the responsibility for any potential tax liability for capital gains taxes plus any real estate commissions when the home is sold.

Tips & Warnings

This articles is not intended to take the place of legal advice. If you need legal advice, please consult a California family law attorney. This article was written in September, 2009 and the law may change. For additional information, read IRS Publication 504. It can be found at http://www.irs.ustreas.gov/pub/irs-pdf/p504.pdf