What Happens To a Property After a Divorce?
Your complete, up-to-date guide to property division, real-life options, and next steps.
How Divorce Impacts Real Estate
When a marriage ends, courts must decide what to do with the family home, rental properties, vacant land, and even timeshares. Two main legal systems govern this process:
- Equitable Distribution (used in most U.S. states): Assets are divided “fairly,” but not always 50/50.
- Community Property (AZ, CA, ID, LA, NV, NM, TX, WA, WI): Assets acquired during marriage are split 50/50.
Marital vs. Separate Property
Marital Property includes homes, land, or improvements purchased during the marriage, regardless of whose name is on the deed.
Separate Property is what you owned before the marriage, plus gifts or inheritances received individually. However, if separate funds are used to buy a jointly titled asset, the lines can blur—triggering “commingling” disputes.
3 Common Outcomes for the Family Home
- Sell & Split Net Proceeds
Ideal when neither spouse can afford the mortgage alone or both want a clean break. - Buy-Out
One spouse refinances the loan, removes the other from the mortgage, and pays the ex their share of current equity. - Deferred Sale
Courts sometimes allow the custodial parent to stay until children graduate, then order a future sale.
Mortgages & Other Debts
Even if a divorce decree assigns the mortgage to one spouse, lenders can still pursue both signers if payments are missed. The safest route is refinancing or loan assumption to remove the departing spouse’s liability.
Capital Gains & Tax Tips
Transfers between spouses incident to divorce are generally tax-free. Later, when the property is sold, the spouse who keeps the house may claim the full $250k capital-gains exclusion ($500k if remarried and filing jointly) provided they meet the 2-out-of-5-year residency rule.
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