New Jersey FAQ: Divorce and the Marital Home

New Jersey Marital Home FAQs

In a divorce, what are my options with regard to the house?

When is the marital home considered to be marital property?

Should I move out of the marital residence before the divorce is finalized?

I paid the $100,000 down payment with my own money that I earned prior to the marriage. Is the $100,000 deposit subject to equitable distribution?

I owned my home prior to the marriage, but put my wife on the deed.  Is the marital home considered a joint asset?

My mortgage payments are really high.  Can I to sell the marital home before the divorce is finalized?

My wife received the house in the divorce settlement.  Am I automatically removed from the mortgage?

What are the tax consequences of selling my share of the marital home to my wife?

1. What are my options with regard to the house?

The marital home is in most cases the family’s most valuable asset. Upon a divorce, there are three choices that a divorcing couple can choose to equitably distribute the family home.

1. Sell the House. The easiest option is to sell the home and divide the proceeds. (Sometimes this is really the only option because neither spouse can afford to buy out the other.) The proceeds can be divided equally, or in unequal shares to compensate one spouse for giving up another asset. (See also Valuing the House in a Settlement Agreement).

2. Arrange a Buyout. The second option is for one spouse to buy out the other spouse’s equity. Usually, the buying spouse will arrange to refinance the loan; at the closing the selling spouse will receive the agreed-upon share of the equity, and the mortgage will be in the buying spouse’s name alone. The refinancing does have costs, including title costs, a new survey, recording fees, and attorney’s fees. The spouses will have to negotiate who will bear these costs as part of the divorce settlement.

3. Continue to Co-Own the House. The third option is to maintain the status quo and continue to own the house together, with no sale or refinance. This option is most common when children are high-school age and it would benefit them to remain in the home and in their current school. Therefore, many divorcing couples agree to keep the marital home until the children graduate from high school. Generally, one spouse will move out, and wait for a period of years before the house is sold. It’s challenging for divorced spouses to cooperate in keeping a family home operating and fully paid for. Also, it can make it difficult for the spouse who moves out to afford another home, because the loan on the family home is still part of the credit record.

In addition, any liens or judgments against one spouse can cause harm to the other spouse’s credit rating.

2. When is the marital home considered to be marital property?

Generally, if a home was acquired during the marriage then it is subject to equitable distribution. If a spouse owned the house home prior to the marriage and didn’t put the other spouse on title or otherwise mix up the ownership with jointly owned property, then it remains separate property and it is not subject to equitable distribution.

3. I want to get a divorce. Should I move out of the marital residence? Or can I make my spouse move?

Whether you should move out of the house when you’re planning a divorce depends on your particular family situation. If it’s no longer comfortable for you to live with your spouse, then there’s generally no harm in moving out—New Jersey is a “no-fault” state and there’s no issue of “desertion” when one spouse leaves the home.

If both parties own the house, the family court will not order one spouse to leave the marital home unless there is a history of domestic violence.

4. I paid the entire $100,000 down payment on our family home with money that I earned prior to the marriage. Can I get back my $100,000, or is it subject to equitable distribution?

When one spouse contributes money toward the purchase of the marital home, and places title to the home in both spouses’ names, the contribution of that money is considered a gift unless there is prenuptial agreement that says otherwise. Once the home becomes the marital home, all of the equity becomes marital property regardless of where the funds for purchase came from.

5. I owned my home prior to the marriage. I placed my wife on the deed when we got married. We’re now getting divorced after having been married for only a short time. Is the marital home considered a joint asset?

When one spouse owns a home prior to the marriage and then transfers an interest in the house to the other spouse during marriage, the transfer is considered to be a gift, and the property is transformed into a marital asset subject to equitable distribution. Even though this is the law ,it does not necessarily follow that the equity in the home will be equally divided between the spouses at divorce. If the marriage was relatively brief, the spouse who owned the home before the marriage will likely receive a credit for contributing the valuable property. However, the longer the duration of the marriage, then it is less likely that the spouse who owned the home before the marriage will receive any contribution credit.

6. The mortgage payments for the marital home are ruining me. The stress caused by our high mortgage payments is one of the main reasons why we are getting divorced. Can I request permission from the court to sell the marital home even before the divorce is finalized?

The general rule governing a request to sell the marital home before the divorce is final is explained in a court case from 1978: Grange v. Grange, 160 N.J. Super. 153 (App. Div. 1978). Basically, the Grange case stands for the principle that courts generally won’t approve a request for sale while the divorce is still pending, unless the home is in foreclosure or will soon go into foreclosure, or the family does not have the financial resources to meet the monthly mortgage payments. In those cases the court may grant a motion to compel the sale of the marital home while the divorce is still pending.

7. As part of the divorce settlement my ex-wife was given the marital home. As a result of this transfer am I now automatically taken off of the mortgage as well?

No. In order to be relieved of responsibility for the mortgage on your family home, the loan must be refinanced in your ex-wife’s name alone. The only other way to take your name off the loan is for the mortgage company to agree to it based on your representation that your spouse has bought out your interest, but most mortgage holders won’t agree to this unless there’s a great deal of equity in the house and you complete a lengthy and detailed application.

8. I am selling my share of the marital home to my wife. What are my tax consequences from this transfer?

There are no capital gains and no federal taxes due to a spouse who transfers his share of the marital home to the wife as part of a divorce. Internal Revenue Code Section 1041, entitled “Transfers of Property Between Spouses or Incident to Divorce,” provides that where property is transferred to a spouse or a former spouse as part of the divorce, then no gain or loss will be recognized by transferor/spouse. Moreover, the spouse who becomes the sole owner of the marital home takes the same basis in the house as he or she had when the parties owned it.