Real Estate Issues in a Divorce
There are three elements to all real estate: title, equity, and indebtedness.
The title is whose name is on the property. In marriages, half of the time both names are on the title and half of the time it is just one person’s name. The titling is a product of circumstance where the house that was owned before the marriage or while buying a house during the marriage, only one party qualifies to get the mortgage. While mortgage can be in one spouse’s name, but the house is jointly titled, it’s not a requirement. There might be certain title companies that want it one way or the other, but under marital law, it’s not required that both parties be on the title if they’re not both on the mortgage.
There are two types of ways in which real estate can be titled amongst multiple persons. One of them is as Joint Tenants. If you were investing in property with another person, say your Uncle Jack, you two would own it as Joint Tenants. When Jack passes away, you now own the property with whomever he left it to or whomever his heirs are. The other way in which you can own property with multiple people is as Tenants In Common. This is how spouses are often explicitly named as title owners. As an operation of law, they jointly own real estate together. That way, if something were to happen to one of them while they were still married, the title automatically transfers to their co-owning spouse. This is why when you hear about somebody passing away who’s married, there’s never a concern about having to probate the estate and their property, whether their half of the property is going to go to their spouse. It’s just automatic.
The title is separate from equity. Consider there could be $200,000 in the house. Maybe it was put in as a down payment. Or maybe $200,000 accumulated because you’ve paid down the mortgage. Or the market went up. Regardless there’s $200,000 gap between the value and the mortgage. If the parties are married, that’s marital equity even if the house is titled to one spouse and not the other.
It remains marital property until it’s excluded from the marital estate, which can happen because the equity is shown as being owned prior to the marriage by one of the parties. Or it was inherited during the marriage. Or it was a gift during the marriage (to one of you, not both). Those are exceptions that are relevant as divorce law at the end of a marriage. But at the initial first blush, it’s marital equity, even if the property’s only titled to one party.
And then lastly, you’ve got indebtedness to real estate. That mortgage could be held by both parties, and therefore, they could both be named debtors. But again, if only one of the spouses is on the mortgage and then a divorce arises, the mortgage is then held against the entire marital estate, namely the equity from the house. Nonetheless, the mortgage is the marital debt.
The important takeaway here is the three real estate components. Under marital law, the way one of them is attached to married couples does not govern the other parts of the three components.