Typically, married couples share everything with one another. They cooperate to overcome times of hardship, and they share in one another’s good fortune when positive things happen. Community property statutes give each spouse an interest in the income of the other and require that they share responsibility for marital debts as well.
Married couples can often enjoy a much higher standard of living by combining their resources and sharing expenses than either could afford on their own. Frequently, spouses combine their resources to purchase and then maintain a shared marital home. The equity that they accrue in that home might be one of their most valuable sources of shared wealth.
Home equity can also become a stumbling block if the marriage ends in divorce rather than death. People often worry about what community property statutes might mean for their home equity. Is an even split of home equity the standard solution when Texas homeowners divorce?
Property division requires careful consideration
Community property statutes are not as simplistic as people often assume. The terms set should reflect the unique circumstances of the spouses. The division of home equity, in particular, often requires careful negotiation.
First, spouses have to determine the current fair market value of the home. Then they may need to reach an agreement regarding possession of the property. Factors including a pre-existing connection to the property before the marriage and the custody of any shared children may influence who stays in the home and who leaves.
The spouse who stays typically refinances. When they take on the mortgage on their own, they can withdraw equity to compensate the spouse who leaves the home. However, they might not be able to afford the mortgage after withdrawing equity. Spouses may need to make alternate arrangements.
The spouse leaving the home could accept other property to offset their interest in home equity. Retirement savings, vehicles and other valuable assets can balance out the value of home equity. Responsibility for marital debts can also factor into how the spouses divide equity and other marital assets.
In scenarios where spouses agree to sell the home, they might agree to an even split of the proceeds from the sale. In scenarios where judges make property division decisions because spouses can’t agree, a 50/50 split is merely the starting point for the process. Judges can enter highly-uneven property division settlements in some cases, depending on what they view as just given the spouses’ circumstances.
Learning about property division statutes can help people approach divorce negotiations pragmatically. Home equity and other high-value marital assets can become points of contention if spouses don’t agree on how to share them.