Mediation and the Family Home – Part II

In our last post we talked about mediation and what to do with your family home during your divorce. Whatever you decide to do on a temporary basis, however, if you are like most couples who choose mediation, it will not be too long before you need to move on to making a final decision about the home.

Options for the Family Home in Divorce

The most popular alternatives for what to do with a family home on final judgment of divorce include the following:

  • The parties immediately sell the home and divide the proceeds.
  • One spouse keeps the home and the other immediately receives other marital assets to offset the value.
  • One spouse “buys out” the other with a contract providing for installment payments over time.
  • The parties continue to own the house jointly for some predetermined length of time during which one spouse keeps exclusive possession of the home. The time often extends until the youngest child reaches a certain age or leaves for college. At the end of that period the parties sell the house and divide the proceeds.
  • The parties continue to own the house jointly for a predetermined length of time while the children stay there and the parents alternate living there (nesting). After the children have reached a certain age, the parties sell the house and divide the proceeds. The children then start spending time at each parent’s new home.

Mediation Provides Maximum Flexibility

If this decision is left to a judge, the judge might award the home to one spouse, or might order the parties to sell it and divide the proceeds. While judges sometimes order more creative solutions, they do not usually have the time to consider all potential alternatives. The beauty of mediation is that it leaves the two of you free to consider all possibilities and then spell out the details in your Marital Settlement Agreement. Mediation also allows you to consider issues that may be closely intertwined with the home at the same time. These can include questions about employment, other assets, and/or children’s needs.

Emotional Attachment Can Fuel Mistakes

Many people have an emotional attachment to the family home. It is important not to let such feelings get in the way of reaching common sense solutions that will be best for your future. Common pitfalls to avoid when deciding what to do with a family home include the following:

  • Thinking that all assets are equal.

    • Chris and Sarah have $325,000 in joint pre-tax retirement assets; $50,000 in cash; and a home currently valued at $425,000. They purchased the home several years ago for $300,000, and it currently has a $200,000 mortgage balance. Sarah proposes that she take the house with the mortgage and $75,000 of the retirement assets, leaving Chris with the remaining retirement assets and the cash. While this technically gives $300,000 of value to each party, it is not really an even exchange. Money in the retirement account will not be taxed until withdrawal and will then be treated as ordinary income. If Sarah needs to sell the home in the future, however, she may have to pay capital gains tax on some of the increase. For example, on a sale for $750,000, there would be capital gains tax on about $200,000 ($750,000 – $300,000 basis – $250,000 single homeowner capital gains exclusion).
  • Not planning adequately for future needs.

    • Another consideration for a spouse who is thinking of trading away retirement assets for a home is the difficulty of rebuilding retirement assets. A larger home is nice to have, but losing retirement assets can set a mid-career person back many years in preparing for the future.
  • Failing to consider the true costs of keeping a home.

    • Sarah is committed to keeping the home, even though selling it would give each spouse a net of $112,500 to spend on rent or on the downpayment for a new home. Sarah does not want to rent or downsize, and since the mortgage payment on a new smaller home would be almost as much as the current mortgage, she believes that it makes more sense to keep the current home. There are a few things, however, that she has not considered, including the following:
      • The property tax on the smaller home would be at least $200 per month lower.
      • The utility payments on the smaller home would also be about $200 per month less.
      • Maintenance expenses on the smaller home for things like painting, etc. would also be lower.
      • Renting would eliminate the property tax and most of the maintenance expenses completely and would also result in lower utility costs.

A Financial Professional Can Provide Valuable Help

Scenarios like the one above often require the assistance of a financial expert to estimate the true future value of each asset. A financial specialist in a divorce case is usually an accountant or financial planner who has completed additional training in resolving common divorce issues. The expert may have a certification, such as “Certified Divorce Financial Analyst” (CDFA). If you and your spouse have chosen mediation, you can decide whether it makes more sense for each of you to use your own financial planner or to hire one joint expert. A joint expert will help both of you understand the potential tax effects and other financial implications of your planned property distribution and other financial aspects of your divorce.

if you and your spouse are ready to work on the final disposition of your property in divorce, contact one of our caring and experienced family law mediators today.


Mediation and the Family Home

In our March post, we talked about getting ready to resolve financial issues in divorce mediation. Today we will talk about how mediation can help you decide what to do with the family home while your divorce is pending. Read more

Negotiating Personal Possessions in Divorce Mediation

Most people who choose divorce mediation are more easy-going than those who decide to fight over every single personal possession in divorce court. This is almost always a good thing. Being easy-going tends to make divorce less stressful, cheaper, and faster. It is important, however, not to let yourself become so laissez faire that you end up giving away the store. Read more

Tailoring Mediation: Gerry and Beth Examine Their Finances

When we last saw Gerry and Beth, they had decided to try marriage counseling. In the meantime, however, Beth is also meeting with an attorney to help her understand what they would need to address in a divorce. Gerry is holding off on talking to an attorney, but he has done a little research on his own. He too is concerned about how they would resolve their financial issues. Today we will consider how divorce mediation might help this couple.

Financial Backdrop

As we learned in our introductory post, Gerry currently earns approximately $150,000 per year as the CEO of a small company. Beth, who spent 10 years as a stay-at-home mom, now earns $60,000 per year as a teacher. She would like to retire next year, when she will be eligible for an annual pension of about $22,000. The couple’s home, which they purchased during the marriage, is fully paid for and has a current value of about $450,000. They have joint savings and investments of $50,000, and Gerry’s 401k has a balance of approximately $800,000.

On the recommendation of her attorney, Ms. White, Beth is preparing a detailed budget and completing a  New Jersey Family Part Case Information Statement. She is finding this somewhat daunting with so many decisions still up in the air. Ms. White points out that some of those decisions might be easier with expert assistance. They could start by hiring a joint Certified Divorce Financial Analyst (CDFA). A CDFA can help mediation participants project future scenarios and identify potential ways to optimize each party’s post-divorce financial situation. Hiring a joint CDFA can result in substantial savings compared with hiring separate financial experts for litigation.

Let’s look one at a time at the issues facing Beth and Gerry:


Because the New Jersey alimony statute (NJSA 2A:34-23) does not provide formulas, but instead simply contains lists of factors, mediation is a good forum for presenting alimony arguments. Spouses who work out their own solutions can save a great deal of time and money that they would otherwise spend arguing in court. For example, Gerry and Beth might be able to agree on a graduated payment schedule based on anticipated changes in their future incomes. Their alimony discussion could also intersect with their discussions about property distribution.

Amount of Alimony

Like the first two couples in this series, Gerry and Beth have a significant discrepancy in income. This means that Gerry is likely to end up paying Beth some amount of alimony. Beth assumes that she will receive enough to maintain the marital standard of living. Ms. White cautions her that this would be true only if Gerry could afford to pay this much without lowering his own standard of living. There is also the additional complicating factor of Beth’s decision to retire next year, at 62. This would be entirely voluntary, rather than prompted by a lack of ongoing employment opportunities, ill health, or some other factor beyond Beth’s control. Even if Beth stops working, Gerry can therefore argue that alimony should be based on her $60,000 salary, rather than on the $22,000 pension. This could reduce payments by several thousand dollars per year, significantly impacting Beth’s post-divorce lifestyle.

Duration of Alimony

Unlike either of our first two couples, Gerry and Beth have been married for more than twenty years, allowing a New Jersey court to order “open durational” alimony, meaning an award without a set ending date. There would be a rebuttable presumption, however, that alimony would end when Gerry reaches full retirement age, in only three years. Beth could challenge this based on the factors listed in the statute. These include the parties’ ages, health, and other available assets and income; the degree to which an alimony recipient has depended economically on the other spouse; whether the recipient has reached retirement age and has had an opportunity to save adequately for retirement; whether the recipient has exchanged other claims, such as property rights, for more alimony; and any other factors that a court may deem relevant (NJSA 2A:34-23j (1)).

Distribution of Marital Property

Neither Beth nor Gerry appears to have any separate property of significant value. Their home, joint saving and investments, and retirement accounts or pensions are all marital property, as they were all purchased or funded entirely during the marriage. They would, however, have some decisions to make regarding the equitable distribution of their marital property.

The Family Home

Beth has already indicated that she would like to move to New Hampshire, so it could be up to Gerry to decide whether or not they will sell the family home. Since they bought it during their marriage, they could each begin by claiming half the value. There is nothing to prevent either of them, however, from arguing for a different division. New Jersey statutes include a factor list for this as well (NJSA 2A:34-23.1). If they sell the house, they can simply divide the proceeds. If Gerry wants to keep it, however, they will need to agree on an exact market value, so that Beth can get a credit for her share. They could hire a licensed real estate appraiser for this, or they could simply collect some comps on their own. Gerry might then consider taking out a new mortgage to buy out Beth.

Retirement Accounts

Beth asks Ms. White why Gerry couldn’t just give her a portion of his 401k in exchange for her share of the house. “He probably owes me part of the account anyway,” she surmised, “since he has $800,000 saved already.”

Ms. White’s response is that retirement assets need to be valued differently than other assets. There are also open questions, she points out, about the appropriate ages of retirement for each of them, as well as about the potential impact of social security payments. Beth’s own pension would be higher if she waits until 65 to retire, and it isn’t realistic to expect Gerry to pay for her decision not to wait. “$800,000 might sound like a lot,” she notes, “but it wouldn’t maintain even one person at your current lifestyle.”

“We should just sell the house then,” Beth proposes. “We’ll each have plenty of money after that, because we’ll each only have half the expenses we had before.”

“That’s a common misconception,” Ms. White comments. “One person could need 80% or more of the amount that two people need. You lose the benefit of many shared expenses.”

Beth leaves Ms. White’s office in deep thought. She is beginning to question whether or not retiring next year is really such a good idea. After all, she still enjoys her job. Maybe, she thinks, she should just spend a few weeks in New Hampshire this summer and reconsider everything.


Beth and Gerry still have many things to work out. Our series, however, ends here. As we moved through these stories, we saw two out of three couples decide that they wanted to pursue marriage counseling before deciding whether or not to proceed with divorce mediation. In our next post, we will take a closer look at marriage counseling. When is it appropriate? How is counseling different from mediation? Is there such a thing as “divorce counseling?” Stay tuned as we address each of these questions.

Are you interested in talking to one of our experienced mediators about how to structure your own divorce mediation? Contact us today for an initial consultation.

Tailoring Mediation: Eric and Eva Address Financial Issues

divorce assetsIn our last post, we saw Eric and Eva address their child custody issues in mediation, with surprisingly positive results. Today we will look at some of the financial issues they will need to resolve before finalizing their divorce. These include alimony and child support payments, identification and distribution of marital property, and division of retirement assets. Read more

Mediation and the Family Home

House and moneyOne of the biggest benefits of divorce mediation is that the process helps separating couples create their own solutions rather than simply abiding by the decisions of a judge. This flexibility can be a boon when resolving many common divorce issues, including the issue of what to do with a family home. Mediation participants trying to make difficult decisions can explore multiple options and maintain control over eventual outcomes. Read more

Divorce Mediation Up Close and Personal: Derek and Stacey Case Study, Part VI

divorce assets

When we last saw Derek and Stacey in installment No. V of our ongoing divorce mediation series, they were in the middle of their third mediation session. They had completed an accounting of their assets and debts and worked out values for both the family home and Derek’s accounting business. They had also reached agreement regarding how to divide the home value into separate and marital property. When they reached a discussion of their debts, however, things became tense. Let’s rejoin them after their 15 minute break, and see if they can reestablish the amicable tone they achieved earlier in the session. Read more

Divorce Mediation up Close and Personal: Derek and Stacey Case Study, Part V

Couple meeting with divorce mediator

In the last installment of our continuing mediation case study series, Derek and Stacey completed their second divorce mediation session. There were a few tense moments, but with the help of their mediator, Ms. Smith, they were able to establish a temporary parenting schedule for their children. They arrive at mediation session number three ready to examine their assets and debts. After this they plan to look at their individual incomes and expenses going forward, and consider the impact of the New Jersey Child Support Guidelines.
Read more