Spouses preparing for divorce in Texas have to address many emotional and practical concerns. Preserving marital resources and maintaining the same standard of living are often among the top priorities of successful individuals contemplating the legal end of a marriage.
For many couples, the home where they live is their highest-value asset. They may have accumulated tens or even hundreds of thousands of dollars in equity during the marriage. With exceptions for highly unusual cases, divorce usually results in one spouse leaving the home or the spouses selling the property.
Those trying to prepare for their financial future after divorce may need to understand what they can retain after the end of a marriage to plan effectively. How can Texas community property statutes affect home equity?
Spouses share an interest in the home
Unless the spouses made prior arrangements for the home in a prenuptial agreement, they usually have to address their accumulated equity during property division negotiations. Any equity accrued during the marriage is potentially subject to division as community property.
Spouses often need to appraise the home to determine what it is worth and therefore how much equity they have to split with one another. They may need to negotiate possession of the property. Sometimes, neither spouse wants to stay in the home. Other times, both spouses might prefer to stay in the home if they can.
The credit score and income of the spouse staying at the home can influence how spouses address accrued equity. The spouse retaining possession can refinance and withdraw equity to compensate the other spouse. Doing so may significantly increase their monthly mortgage payments.
If withdrawing equity isn’t a reasonable solution, then other marital assets or marital debts can help balance the overall distribution of property and financial obligations. In scenarios where neither spouse can afford the home on their own or there aren’t adequate assets to offset equity, selling the home can be the most effective way of splitting the equity in a fair manner.
Spouses have the option of setting their own terms by negotiating with one another. If they cannot agree on property division details, then a family law judge may apply the community property statute to their home equity and other assets.
Reviewing the marital estate can help spouses strategize as they seek to address their most valuable assets. Property division negotiations often require compromise and creative solutions, especially when spouses share high-value resources.