How to Stay Rational When Making Emotional Decisions About Property in Divorce
Is selling your home or second home a purely financial and rational decision, or is it an
emotional one? In most cases, it’s a bit of both. When you own more than one home in a
California divorce you have to decide on the value of your homes and figure out the smartest
way to factor this into your divorce property division. The value of a home could be more than
financial, it might also be emotional. For example, you may be deeply attached to the primary
residence where you raised your kids, or maybe your vacation home is the home you don’t want
to let go of. Sometimes vacation homes are inherited property that have been in the family for
years, and they have many memories associated with them. You may also have renovated a
home or built a beautiful architect-designed home that is a labor of love. In these cases it’s also
difficult to place a value on the home and/or to part with the home.
When you get a divorce mediation with Santa Clara Divorce Mediators we can help you assess
the value of your home and tax impacts, including the market value and the personal value to
you. Even if you are very attached to your primary residence or vacation home it’s still important
to remain rational and consider all the options.
When you are getting a California divorce and deciding what to do about multiple homes, the
following are some factors to consider:
Should We Keep the Family Home?
Your primary residence is treated differently from second homes for tax purposes. If you have
lived in your home for two years you can qualify for a capital gains tax exemption of $250,000
per person. However if you have other homes or a vacation home, the tax exemption doesn’t
apply. For this reason many divorcing couples choose to sell the family home. This isn’t the
decision that everyone wants to make however, especially if you want your kids to remain in the
house where they grew up. You may need to balance financial and emotional concerns. One of
you could move into a second home and sell it later once you have lived in it for a specific
period of time and qualified for the exemption. With the market slowing down, the more modest
appreciation of second homes could make the tax impact of selling them in the future less
Should We Sell or Rent the Vacation Home or Homes?
As mentioned, the financial calculations about what to do with a vacation home or second home
may vary based on current market conditions and other factors. The emotional considerations
may include how much work one spouse put into redecorating, restoring or building the home.
Additionally, the home could be a place where you have spent many happy family vacations.
How do you know when it’s time to let it go? If it is transferred as part of the community
property, which spouse gets it and how do you put a value on a home that may be worth more
than its market value to you both?
At Santa Clara Divorce Mediators our skilled appraisers can bring you a unified appraisal that avoids the conflict involved in hiring separate appraisers, at a fraction of the cost. We can also help you put a value on the labor one or both of you have put into a home and/or its emotional value to you and your family as a beloved retreat. Some people decide to keep a second home or vacation home and rent it out for part of the year. If one spouse is keeping a home and renting it out, the home becomes a source of income which should be part of the calculation of what the other spouse receives in return as their share of the community property.
How to Factor In Tax Impacts and the Pressures of the Market?
The housing market is slowing, interest rates are on the rise and it’s no longer possible to count
on a seller’s market. It’s important to work with skilled West Coast Divorce mediators who
understand the local market and the tax impacts of selling your property. Some people choose
to rent out their second home or vacation home. This can defer the capital gains tax you would
pay on the home and could buy time until market conditions for selling a home improve.
Giving a home to a child or another relative could be a way of giving your child a tax advantaged
gift which won’t incur tax for them and could be part of your lifetime gift tax exemption. Some
spouses also choose to retain equity in a valuable home as part of the divorce settlement, thus
gaining an income from a home and avoiding tax consequences. Their share of the home could
be reduced and the divorce agreement will need to lay ground rules about who uses the home
and how to renegotiate if one of you wants to sell in the future.
How To Make a Decision About a Home That is Inherited Property?
If the home is inherited property the calculation becomes even more complicated. Both
financially and emotionally, inherited property can be a contentious part of divorce property
division. An inherited property could have been in the family for years. If it’s inherited, it isn’t part
of community property, but if it’s used by both spouses and their families, or if the non-inheriting
spouse pours money and time into the home, the home may be considered “commingled” with
marital assets, which means that part of its value should be factored into the community
property. One spouse may even have gone further and given the non-inheriting spouse title to
the home. When an asset is inherited, in-laws can weigh in and things can get messy. At Santa
Clara Divorce mediators, we are highly skilled divorce mediators who approach any division of
inherited property with care and sensitivity. As well as calculating what percentage of the home
is community property we can help you decide what the home is worth to you personally.
Santa Clara Divorce Mediation Services
Unlike hiring a lawyer, our highly skilled Santa Clara Divorce mediators are there to help you
reach a settlement rather than fight over your property division. Our clients are international,
trust fund families, business executives and professionals who may be juggling international
travel with a demanding schedule and could own property in the US and abroad.
The last thing you need when you are dividing complex assets is a fight with your spouse. We
make the divorce process easier for you and your spouse by offering neutral support for your
divorce during which we give control of the process back to divorcing spouses and encourage
co-operation and conflict de-escalation to have an efficient and amicable divorce.
Our filing and documentation services and convenient high-tech communication platforms make
your divorce more efficient so you can mediate securely and remotely without taking time out
from your busy schedule. We help you arrive at a fair and comprehensive settlement by
conducting a thorough analysis on the community property and helping you optimize your
common assets. We offer neutral appraisal services to reduce conflict and cost.
If you are struggling to make rational but compassionate decisions in a complex, high asset
divorce, please don’t hesitate to reach out to our highly skilled West Coast divorce mediators to
find out how we can support you during your divorce transition.