Family Law...Gray Divorce (Part 2): The Family Home

Kay Rhodenizer – June 2017

(Read Gray Divorce Part 1)

Older separating couples often own a home of significant value.  Pre-separation they may have planned to downsize or rent, freeing up home equity for retirement.  Separation can accelerate the timeline to sell the home, or one partner may now want to keep the house and buy the other’s equity.  In that case, especially for married couples (or cohabiting couples registered as domestic partners) with a lengthy marriage, the buyout would usually be half the home’s current market value (see my February 14, 2017 Blog “Valuing Real Estate When Separating”).

The partner who wants to buy the other’s interest should consider:

  1. How will the buyout be funded?  The home’s value is less liquid than many other assets.  If the purchasing partner will need liquid assets in the near future or for retirement, it may be unwise to trade other liquid matrimonial assets for the home.
  2. What about future maintenance costs, in particular any significant items such as new roofs, windows, furnaces and other mechanical systems and replacing major appliances?
  3. Will the purchasing partner need paid assistance to do routine maintenance chores (gardening, lawn care, snow removal, pool maintenance, small household repairs) previously done by the other partner?  If the purchasing partner did these things will s/he continue to be able to do them in the future as s/he ages?
  4. When will the existing home become too large?  For example, if the purchasing partner wants to keep the home while older children finish university, s/he bears all the risk of future real estate market fluctuations if the sale is postponed until then.  It may be wiser to share the risks and expenses of selling the home with the other partner now by selling the home and re-evaluate how to provide space for older children.
  5. Will the house continue to be “age appropriate” if health changes? Is it one level? Wheelchair accessible or able to be made accessible?  Is there room for a care-giver to live in the home?
  6. Can all the home’s costs be paid from the purchasing partner’s current (and/or retirement) income? An older, financially secure couple (especially a two-income couple) may have been able to set aside funds to cover unexpected and/or major house costs, or access credit and pay it off promptly.  A one income partner may not have access to the same savings or credit after separation, especially after retirement.

In summary, especially in the initial stages of separation, there may be a sentimental attachment to the family home and/or a wish to remain there to maintain at least some continuity while dealing with the other impacts of separation, but this wish must be tested against the new financial realities of separation.  This is a difficult decision that will require legal and financial advice.

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