Divorce and Selling a Home in North Carolina
Divorce is typically financially and emotionally draining, especially when having a house to sell between the two of you. The marital home is most times the largest asset for couples. Having expert advice from your divorce attorney is one thing, but you also need expert advice from a real estate agent that has experience in this field. Understanding the tax and legal rules surrounding the sale of your home will make this chapter in your life less overwhelming.
My name is Stu Barnes and I have sold real estate in Wake County North Carolina for over 20 years. During this time I have also had experience in helping divorcing couples sell their home. Below you will find a few things to keep in mind. *This is not legal or financial advice; you should always contact a licensed attorney and tax professional regarding your specific situation.
Equitable Distribution
North Carolina is an equitable distribution State. What this means is marital property is divided fairly, but not always down the middle 50/50. Marital property will include most things aquired during the marriage, including the home. Separate property is what was owned prior to the marriage and can include things such as a gift or inheritance. Divisible property is property that can increase or decrease in value after separation. If you are considering a divorce in North Carolina, you must be legally separated for one year. Your divorce attorney can help you distinguish the above types of property.
Separation Agreement
A separation agreement is a private and legally binding contract that outlines how things such as property, debts, and certain assets are divided. It can distinguish who is responsible for the mortgage or upkeep of the marital home, explain what happens to the marital home, and it’s main purpose is to prevent any misunderstandings during and after the divorce. In this agreement, it could state that the marital home must be put on the market for sale within a certain timeframe. Both parties must agree on a timeframe and must agree on the same agent to use. Again, this is something you are expected to discuss with your divorce attorney.
Free Trader Agreement
A Free Trader Agreement (FTA) is a document that allows a spouse to acquire or convey real property in their name without the permission of the other spouse. Even if you are separated, you are still legally married in North Carolina. So, a common solution to a spouse that is separated, but wants to buy a house is to have a Free Trader Agreement signed. Obviously, both parties must agree. Your attorney can give you a more in depth understanding of what this will entail.
Capital Gains Tax
This is something you will definitely want to discuss with a tax professional. When a home is sold during or after a divorce there may be a capital gains tax on the profit of the sale. But, there are exemptions that can reduce or eliminate the tax.
It may be beneficial to sell the property during the divorce while still legally married. Essentially, the exclusion for a married couple is $500,000, but if you are legally divorced, individuals can only be exempt for $250,000. To be exempt you must have owned the home for at least 2 of the last 5 years and occupied the home as your primary residence 2 of the last 5 years; these do not have to be consecutive. You can find the actual tax code here.
Conclusion
As you can imagine, I am again going to say that you will benefit greatly by talking to a licensed NC attorney and a tax professional if divorce is a consideration, and especially if you and your spouse own a home. In my experience, most divorcing couples are somewhat cooperative with me as an agent when listing their home. It can get tricky when one spouse does not agree with the other spouse on matters of a list price or accepting an offer at a certain price, but the goal is to get the house sold for the best possible terms.
Please contact me if you need assistance,
