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One of the more challenging aspects of getting a divorce is deciding what to do with the home. While many couples sell their properties and split the proceeds, some choose to co-own the home for various reasons. Is this the best option for this situation, though? Here's what you need to know about co-owning property with your ex to help you decide if this is the right choice for your situation.
Reasons Sharing May Be a Good Idea
There are many good reasons to co-own property with your ex. If the market is slow or property values have taken a downturn, waiting to sell when things improve may be a smart financial move. Co-owning may also be the best option if one spouse wants to keep the home but doesn't have the money to outright purchase the other person's financial interest in the property. In this situation, the residing spouse would continue making payments on the mortgage until he or she can afford to buy out the exiting spouse's share.
Lastly, co-owning may be what your situation calls for if you have children. With the upheaval divorce can cause for kids, making an effort to keep them in the same place will provide much-needed stability.
It's Probably Best to Part Ways, Though
Despite some very valid reasons to co-own a home, the drawbacks to doing so are equally compelling. Both of your names will remain on the mortgage, which can have serious consequences for credit scores if the spouse who stays in the home falls behind on the mortgage. Having one mortgage on your record could also make it difficult to secure financing for a second home.
Another problem is one or both of you may lose out on important tax benefits. For instance, you'll have to decide who gets to write off the mortgage interest and property tax from their federal and state tax returns. There's also a period of time (i.e. 1 year) after you divorce where certain assets can be transferred between divorced spouses tax-free. If you wait too long for one spouse to buyout the other, someone may end up with a bigger tax liability as a result.
Other things that can cause problems in a co-ownership situation is deciding who is responsible for property maintenance and what will happen to the home if one person dies before the issue can be resolved.
If you choose to co-own the home with your spouse despite the drawbacks, it's essential you work out the problems inherent in that decision and make sure your divorce decree reflects the terms you agree to. For more information about this issue or help negotiating with your ex-spouse, contact an attorney like The Law Offices of Paul F. Moore II.Share
24 April 2017