Excerpt from Book #8

"Dividing the Marital Home,
Retirement Assets, and Debts"
By Allison Quattrocchi, Divorce Mediator/Attorney

What do you need to know about the division of the marital home, retirement assets, and debts that will help you and your spouse settle these issues in the most beneficial way?

I. THE MARITAL HOME

A. Can You Keep It?

Both financial and emotional concerns need to be looked at closely before a decision is made to keep the marital home after the divorce. Following is a discussion of those concerns:

1. Financial Concerns

The Increase in Living Costs for Two Households:If viewed only from a financial perspective, divorce seldom makes good sense. Among other things, you and your spouse are probably going to double your combined housing overhead; increase your cost of groceries, household supplies, housing maintenance; incur the cost of separate health insurance for the spouse who was a dependent on the family policy; and, if there are children, increase their costs for housing, transportation, clothing, and entertainment in two homes.

The first strategy in planning for divorce and these increased expenses is for you and your spouse to look at your respective budgets. You each might begin by doing a spreadsheet on the family expenses for at least the past six months to use as a basis for projecting your individual needs for the year following the divorce. You may want to specifically research the cost of other housing options, including utilities, and what the cost of health insurance and car insurance will be under your new circumstances. Use a good monthly budget form so items are not overlooked. (One is provided in the back of this booklet.) If you and your spouse have been living separately for some time, you probably will have a better understanding of your individual budget needs than those not yet living separately.

If you have children and know how much time they will spend with you, estimate their monthly costs along with yours. If certain costs, like child care, are variable, then calculate the annual amount and divide by twelve so you have the monthly figure. If you do not yet know how much time the children will spend with you, use a separate column to estimate the cost of their needs by category for the entire month. You can adjust those costs later when you have decided how much time the children will spend with you and then add those costs to your individual monthly needs. It is important for you to get a sense of what your, your spouse’s, and your children’s reasonable monthly needs are for the year after the divorce, so you can answer the following question: Is there enough money for one of us (or both of us) to keep the marital home at its current cost?

At this time, look only at the overall financial picture. Child support, spousal maintenance, and the division of assets, or exploring ways to increase income or reduce expenses, will all have an impact on your ability to maintain the marital home, but it is too soon to address these issues. If there is enough monthly cash flow to keep the house, then you can start discussing whether one or both of you will own it, and begin sorting out the child support, spousal maintenance, division of other assets, and debts to test that financial feasibility more specifically.

The Desire to Protect the Investment in the Marital Home:Another financial consideration concerning the marital home may be the current and future housing market. If the housing market is currently appreciating and you anticipate that a good return on the investment in the home will be available to you in the future, it may be harder to consider giving up that growth by selling the home now, even when there does not appear to be enough cash flow to support the home.

The worst situation is to find that, due to market conditions (or because the home was purchased recently), you will owe money if you sell it. This, too, creates pressure to find a way to hang on to the home after the divorce, since there may not be any other resource for a down payment on another home.

The financial repercussions of keeping the home or of taking a loss as a result of selling it must be weighed carefully. The questions you might want to ask are: What kind of financial stress will result by keeping the home? What will alternative housing cost? How stable is the housing market? What is the anticipated amount of the loss, if any?