The solution to one problem often constitutes the origin of a new problem. The current rebounding real estate market provides just such a paradox. Because the housing market has started to show signs of life again, many families are no longer upside down on their home. Although having equity in one’s home means that your property may once again constitute a positive investment and retirement tool, these benefits from the turnaround in the real estate market also complicate the divorce process.
When divorce proceedings frequently involved a primary residence with no equity, the stakes were not necessarily very high in terms of litigating the issue of who should be awarded the family home. In many cases, a strategic walkaway by both spouses was the most prudent choice even though such a strategy would result in derogatory credit history. With many family homes becoming a significant asset, the issue of how to handle the disposition of the family home during divorce has re-emerged as an important issue. This two-part blog series provides an overview of the process of distribution of the equity in the family home in a New Mexico divorce under the assumption that the home has positive equity.
One of the most complicated aspects of dividing community property during a New Mexico divorce involves the process of determining the characterization of the family residence as community or separate property and establishing a proper value for the home. If the home was acquired after marriage and paid for with income of a spouse during the marriage, the home generally will be a community property asset so that each spouse is entitled to half the value of the equity in the family home.
The situation becomes much more complicated if either spouse has made a separate property investment in the residence. This situation commonly involves a spouse that makes a substantial down payment prior to marriage or uses an inheritance during marriage to pay down the mortgage or to make improvements to the property. In this situation, the division of the equity from the family residence will not be a 50-50 split but must be adjusted to compensate the spouse who made separate property investments in the family home. The spouse who makes a separate property investment will not only receive an adjustment for his or her separate property contributions but also a larger portion of the appreciation in value because of the spouse’s separate property contributions.
The above information is provided to illustrate general principles of law and should not be interpreted as a specific legal opinion on an individual case. You should contact experienced legal counsel to get specific legal advice that is based upon your specific circumstances.
If you have questions about divorce involving the division of community property during a New Mexico marital dissolution, the Jay Goodman & Associates offers a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your options. Call us today to schedule your free consultation at (505) 989-8117 to learn about your rights and options.
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