Tip #5: Understand YourOptions When It Comes To The Family Home

The Family Home

Each divorce causes the creation of two new households. Generally, one household will include children and the other will not. In many instances, the family home may be one of the most significant assets acquired during the marriage because of the extraordinary rise in the value of residential real estate.

Unless an agreement is made to the contrary, a court may deem it unfair to let one party use the residence and tie up the other's equity for a long period of time. But, on the other hand, it may be less expensive for one party to remain there. In either case, both of you need to prepare for the contingencies.

Find out the likelihood of the family home being sold. Begin to look into alternative housing for you and any children who are dependent upon you. Compare the cost.

Get an estimate of how long it will take to sell the house for close to what it's worth. Check on the real estate market in your locale by calling realtors and brokers. Get information, but don't sign anything.

If there is a move, someone will have to pay for the packing and moving expenses. Get estimates from moving companies and add this expense to your checklist. Then make sure that your settlement covers it.

Find the best way to deal with school changes for children if that becomes necessary.

If there is a sale, find out how the insurance and tax rebates will be divided.

If you want to try to keep the house, you may want to look into a total refinancing, a second mortgage, an equity line, a home equity loan, or another means by which one of you can buy out the other's share. If you don't have credit or the financial means yourself, consider asking parents and relatives who may be willing to help you.

Disputes over furniture and personal property can be expensive. Think about how to fairly evaluate and divide personal property. Be reasonable. In many cases, people get carried away with emotions and pay lawyers more to fight over personal property than it would cost to replace the property.

Find out about taxes and deferring taxable gains. If you over 55 years of age, there are other questions.

REMEMBER: Tax consequences are very important, so check them out before you finalize anything. If there is a sale and the equity is not reinvested within two years, you may have significant tax consequences. But there are rules that, if complied with, can allow you to defer these tax consequences. FIND OUT NOW how you may be affected and PLAN NOW so these consequences can be avoided. The last thing you want is to find yourself borrowing money to pay taxes you didn't plan for.

REMEMBER: There are special tax rules if one or both of you are over 55 years of age. Make sure that you fully understand these rules which may not affect just you, but also a future spouse and your children.

If you are planning to buy another home, shop for mortgages. Remember that in addition to the downpayment, you will need enough moneuy to pay fees, insurance, property taxes, title insurance, and various closing costs. And make sure to find out what price home you need to buy to defer tax consequences.