Property Transfers in Divorce: Transferring House Titles
Finalizing a divorce takes time. Even once the parties have agreed on all relevant matters–division of property, alimony, child custody, child support–there are additional steps to take. Parties need to adjust their tax filings, they may need to change their names, and they have to effectuate the transfer of property. Splitting the amounts in shared bank accounts may be a simple process, but distributing other types of property require additional work. The family home is often a hotly contested piece of marital property. Once ownership has been decided, how do you actually finalize the transfer in a divorce? Continue reading to learn about the title transfer process during divorce. If you have any questions, or if you need assistance with a New Jersey divorce or equitable division of property, call a knowledgeable New Jersey marital property division attorney.
Options for Distributing the Family Home
There are a few different ways that parties or the court may decide to treat the family home. Which option you choose determines the process for distribution. The most common outcomes for the family home in a divorce are the following:
- Sell the marital home and divide the sale proceeds between the parties in accordance with a settlement agreement or as determined by the court.
- Distribute the house to one spouse by having them buy out the other spouse’s home equity.
- Distribute the house to one spouse and, in exchange, the other spouse will receive other assets of equivalent value or otherwise as agreed upon.
- Keep ownership status quo and allow the spouse with primary custody of the children to continue residing in the house until the last child reaches adulthood, at which time the house will be sold and the proceeds split between the spouses.
Often, the simplest choice is to sell the house and split the proceeds. However, if the parties decide that one spouse will keep the house after the divorce, the parties will need to effectuate a transfer of title.
Taking Advantage of Tax Benefits When Transferring House Title
If you have decided that one spouse will keep the house in their name, you’ll need to transfer the title. Different transfer methods have different tax consequences, so it’s important to discuss your options with your divorce attorney as well as your financial advisors.
Federal law provides that transfers “incident to divorce” will not be subject to income tax. Transferring property to your spouse while married will also avoid income or gift taxes. Typically, if the transfer occurs within a year of the divorce or is otherwise related to the divorce–such as if the transfer is provided for in a marital settlement agreement–you’ll get the tax benefits.
New Jersey law also provides an exclusion to its realty transfer tax for property transferred within 90 days of divorce, and the law carries a similar exclusion for transfers between spouses. Discuss your plan for transfer with your attorney to ensure you avoid unnecessary taxes.
There may be certain circumstances under which it’s preferable to treat the transfer as a “true sale” and wait until more than a year after the divorce, even though you’ll forego the tax breaks. For example, effecting a true sale will adjust the house’s market value for the purposes of capital gains. If the property is a second home rather than a primary residence, and the new owner might later sell the property, the capital gains tax on the subsequent sale might be much higher if the parties transferred the property as part of the divorce.
Changing Title to the Home
Assuming you have decided to transfer the house as part of the divorce settlement, you’ll need to actually transfer the title. If you are keeping the house, that means you will be removing your spouse’s name from the deed as well as the mortgage.
Often, the easiest way to transfer title is to execute a “quitclaim deed.” A quitclaim deed is the simplest deed of transfer, transferring title and legal interests in real property from one party to the other without any warranties. You and your spouse will execute a new deed with you and your spouse as grantors and you alone as grantee (or, if your spouse had sole title, from your spouse as grantor to you as grantee). You’ll sign the document in front of a notary and record the document with the county clerk. Your attorney can walk you through the process and which documents you’ll need to obtain to prepare for the transfer.
If you and your spouse are both on the mortgage, you’ll also need to remove your spouse’s name from the mortgage. That process can be more complex. You might need to refinance the mortgage into your name. Your property division lawyer can help you choose a bank for refinancing and get the process started.
Call a Knowledgeable New Jersey Divorce and Marital Property Division Attorney Today
If you’re considering divorce or dealing with issues involving parental rights, child custody, equitable division of property, alimony/spousal support, child support, or other family law matters in New Jersey, contact the skilled and dedicated Union family law attorney John B. D’Alessandro for a consultation.