In 2019, Jeff Bezos and MacKenzie Scott (formerly MacKenzie Bezos) ended their marriage after 25 years in what was the most expensive divorce in history and in what made Scott one of the world’s wealthiest women. Though most of the details of the divorce were kept private, it was reported that Scott received the parties’ Beverly Hills home, believed to be worth more than $37 million at the time. Scott, however, decided to donate the home to a nonprofit organization. Bezos reportedly kept the parties’ Washington DC mansion, as well as several other properties.
When Kim Kardashian and Kanye West split up in 2021, Kim kept their mansion in Hidden Hills, California and allegedly bought out West for his interest in the home for $23 million. The parties also had other properties in Malibu, Idaho, Palm Springs, Calabasas, Wyoming, and Belgium.
In both celebrity and non-celebrity divorces, real property is often the most valuable asset to be divided. Unlike celebrities, however, most couples only need to worry about dividing one home. What happens to a home during a divorce?
First, it is important to understand the distinction between a home’s title (ownership) and the mortgage obligation. The ownership interests in a home are determined by a deed that typically is filed with the county’s assessor and/or recorder. There are several different “types” of ownership, and these can vary state-by-state. Nevada recognizes four types of ownership:
- Sole ownership: One individual or entity owns the property completely per title – though, as Nevada is a community property state, there can be a community property interest in a home even if both spouses’ names are never on it.
- Community property ownership: A married couple owns the property as community property.
- Joint tenancy: Two or more individuals own the property, with all owners having equal ownership.
- Tenancy in common: Two or more individuals, who cannot be spouses, own the property but each owner may have a different ownership percentage.
The ownership is generally established when a home is purchased on the deed. Notably, this is different from a mortgage obligation. For example, a husband could be the only name, and the only one legally obligated to pay, a mortgage, while a deed may state the ownership of the home is as community property. One does not typically need to be on a real property deed in order to be obligated to pay the mortgage, and vice versa.
If one party is awarded property in the divorce, therefore, transferring title is fairly simple and generally just requires that both parties sign a quitclaim deed. If there is a mortgage on the property, however, things get more complicated.
Married couples usually acquire mortgages in both names. In fact, in closing on homes, mortgage brokers usually assume that both parties’ names will be on both the mortgage and the property. In fact, if one spouse wants a property in their sole name, the other spouse legally must sign a quitclaim deed relinquishing their community property interest in the property in order to make that happen. When a couple acquires a mortgage in both names, one or both names will need to be released from the mortgage obligation post-divorce. There are several options for this.
First, the parties can simply sell the home and split the net proceeds. This is the simplest solution, and it also makes sense in many divorces because the proceeds constitute a large amount of cash that can be offset in exchange for other property that is awarded to either spouse in the divorce.
The second option is to keep both names on the mortgage, either because one spouse agrees to do so or because the parties plan to keep the home as an investment property post-divorce. This option is riskier. If, for example, one party keeps a home in the divorce and agrees to pay the mortgage payments but the other party agrees to keep their name on the mortgage, if the first party simply stops paying the mortgage, the second party would still have that debt obligation, whether their name is on the title or not.
Similarly, if two parties agree to each pay one-half of the mortgage to keep a home as an investment property and one party stops paying their half, the other party is still responsible for the entire mortgage, even if the parties have an agreement to split it. This can have detrimental effects on a person’s credit.
The third option is for the party who wishes to keep the home to refinance to take the other party’s name off of the mortgage. If the party keeping the home has income sufficient to qualify for the mortgage, this is typically not an issue. It is, however, more complicated for an ex-spouse who is not employed. Alimony, however, can sometimes be used as income when applying to refinance.
This option, however, may require that the party keeping the home buy the other party out of their interest in it. If there is not enough equity to take out or enough other assets to offset the interest, this may not be a viable option. Additionally, a party should remember if equity is taken out during a refinance, and if a higher interest rate is applied during a refinance, the monthly mortgage payment will be higher – sometimes significantly higher – after the refinance. A party should ensure they have adequate income to cover the mortgage before removing a portion of the equity from the property.
Divorcing parties should be cautious about approaching the disposition of real property in a divorce. There are several methods to divide a home, each with their own pros and cons. If you are dealing with a divorce, or contemplating divorce, and there is real property involved, an experienced family law attorney can help you determine your best options as to what your interest in the property is and how to divide it in a divorce.