In a divorce, one of the biggest fears people face is the loss of property. It can be difficult to determine what you will keep or lose. Moreover, there may be concerns about what you must sell, even when you are given possession of something.
Ultimately, there are no clear-cut, yes-or-no answers about whether you will be forced to sell your property in a divorce. It all depends on the final divorce ruling and your state’s property division model.
Property Division Models
There are two dominant property division models in a divorce. Most states use equitable division. Standards vary, but essentially, the court grants property according to what is most “fair.” For instance, if only one of the two spouses plays piano, they may be allowed to keep the baby grand.
In California, keeping property in a divorce is not a cut-and-dry scenario. The state uses a community property division model, meaning it splits marital assets 50/50 among the divorcees. This forces the couple to share assets, which could result in one spouse being forced to sell property.
The Cost of Keeping Property
Marital property is, generally, anything that was purchased during the marriage. Regardless of who overtly bought or used the item, it technically belongs to both spouses.
In an equitable division state, whether you must sell property is dependent on the final rulings in the divorce. You may be asked to pay your partner a certain sum of money. This might be money that you don’t overtly have on hand. That money might be tied up in your physical property, meaning the only way you can meet the demand is by selling what you can.
In a community property state like California, the cost is more direct. Each spouse should walk away from the marriage with 50% of the assets. When the court gives you a piece of property, it assumes that you will give your spouse 50% of that property’s value.
Therefore, keeping anything means you will owe your spouse something in return. You can pay them directly, giving them cash for half the property’s value. Trading is another option. For each piece of property you keep, you can give your partner physical property to cover the cost. When that fails, you may be forced to sell.
Reasons to Sell Your Property in a Divorce
Physical property has inherent value. Above, we mentioned a baby grand piano. Generally, these are expensive. They can cost thousands of dollars depending on their age and condition.
Unfortunately, that cost is not immediately accessible. The value is tied up in the item. Imagine for a moment, the judge awards you the baby grand in the divorce. However, you live in California, and you are expected to pay your spouse half the value of that piano. Now you have a problem. If the piano costs $3,000, you may not have $1,500 on hand to simply give your spouse. In fact, you may have received more physical property in the divorce, meaning that ultimately, you have no funds to pay for anything.
When all your money is tied up in your physical assets, you may be forced to sell that property to cover the cost of your divorce.
Planning for Your Assets Post-Divorce
Work with your attorney, and strategize your property. Consider which items you are more likely to keep. This will be the property that you used or contributed to the most. From there, factor in what it will cost to keep this property. In an equitable division state, you may be able to keep the property outright.
In a community property division state, you will owe your spouse half the property’s value. Once you’ve tallied up the cost, think about how you will pay your spouse for it. If you don’t have enough liquid assets, you will be forced to sell property to cover the expenses. From there, consider which property you cannot live without and what you can sacrifice.
Unfortunately, you may not be able to exactly predict whether you must sell your property in a divorce. With some skillful forethought, however, you can devise a plan and prepare for what you can keep and what you must lose.
If you need help protecting your property in a divorce, contact our firm for help. You can call us at (805) 633-4999 for a free consultation, or you can schedule time with us online.