You’re getting a divorce in Arizona, are you SURE you want the house?
When you find yourself facing divorce, it often feels as though everything you thought you knew about your life and your future is suddenly flipped upside down and the struggle begins to make sense of the pieces that remain. In an effort to retain some semblance of normalcy, it’s common to want to stay in the house that you are used to, especially if there are children involved. While it is tempting to want to lean on the stability of staying in the family home, be aware that it may also be the most costly mistake you can make.
First and foremost, a house is somewhere to live. It does NOT provide any income to support your lifestyle. If you and your spouse lived there for a long period of time, it’s highly likely that there is a fairly large chunk of equity trapped in those walls. If you are awarded the home in the divorce, it could be the largest asset in the settlement. Let’s assume the home has a market value of $400,000 and there is $300,000 in equity.
As marital property, half of that equity is yours, but the other half is your spouse’s. So if you are to keep that home, then a full $300,000 of your settlement will be tied up in that property. That same money could generate over $13,000 a year in income if it were invested conservatively. And don’t forget about the costs of upkeep and maintenance that will increase the amount of income you’ll need just to make ends meet.
In addition, don’t forget about the potential tax impacts down the road. If you were to sell the house while you are still married, the $300k capital gain would fall under the marriage exclusion of up to 500k and be tax-free.
Once you transfer that home into your own name, if you sell it now with a gain of $300k, the personal exemption is only $250k so you will owe capital gains tax on 50k of gain or $7,500 and even more if you’re a high wage earner.
Divorce is difficult but you also have an opportunity for a fresh start and getting off on the right financial footing is essential to your future. To be certain that you understand all of the ramifications of any property settlement you are considering, bring a Certified Divorce Financial Analyst (CDFA) into your team to shine the light onto some of these issues.
You only have one chance to get your settlement right. Take the time to gather information and make sure you are doing the right thing. It will be the best decision you ever made.
By: Nancy A Hetrick, MAFF®, CDFA®
If you have questions about wanting the house in an Arizona divorce case, you should seriously consider contacting the attorneys at Hildebrand Law, PC. Our Arizona community property and family law attorneys have over 100 years of combined experience successfully representing clients in community property disputes and family law cases.
Our family law firm has earned numerous awards such as US News and World Reports Best Arizona Family Law Firm, US News and World Report Best Divorce Attorneys, “Best of the Valley” by Arizona Foothills readers, and “Best Arizona Divorce Law Firms” by North Scottsdale Magazine.
Call us today at (480)305-8300 or reach out to us through our appointment scheduling form to schedule your personalized consultation and turn your Arizona community property or family law case around today.
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Chris Hildebrand wrote the information on this page about your decision to keep the house after a divorce in Arizona to ensure everyone has access to information about family law in Arizona. Chris is a divorce and family law attorney at Hildebrand Law, PC. He has over 24 years of Arizona family law experience and has received multiple awards, including US News and World Report “Top Arizona Divorce Attorneys”, Phoenix Magazine “Top Divorce Law Firms”, and Arizona Foothills Magazine “Best of the Valley” award. He believes the policies and procedures he uses to get his clients through a divorce should all be guided by the principles of honesty, integrity, and, quite frankly, actually caring about what his clients are going through in a divorce or family law case. In short, his practice is defined by the success of his clients. He also manages all of the other attorneys at his firm to make sure the outcomes in their clients’ cases are successful as well.