Older separating couples often own a home of significant value.
Pre-separation, they may have planned to downsize or rent, freeing up home equity for retirement. Separation can accelerate the timeline to sell the home, or one partner may now want to keep the house and buy the other’s share.
In that case, especially for married couples (or cohabiting couples registered as domestic partners) with a lengthy marriage, the buyout is usually half the home’s current market value, less estimated real estate commission and legal fees to sell it, even though the house is not being put on the market.
The partner who wants to buy the other’s share should consider:
How will the buyout be funded? If the purchasing partner will need liquid assets in the near future or for retirement (RRSP’s, investments, etc.), it may be unwise to trade these in order to keep the home and/or obtain a mortgage.
What about future maintenance costs - in particular, any significant items, such as new roofs, windows, furnaces and other mechanical systems or replacing major appliances?
Will the purchasing partner need paid assistance to do maintenance (gardening, lawncare, snow removal, pool maintenance, small household repairs) either now or as s/he ages?
When will the existing home become too large? For example, if the purchasing partner wants to keep the home while older children finish university, s/he bears all the risk of future real estate market fluctuations if the sale is postponed. It may be wiser to share market risks and sale costs with the other partner by selling the home now and re-evaluate how to house older children.
Will the house continue to be “age appropriate?” Is it one level? Wheelchair accessible or able to be made accessible? Is there room for a caregiver to live there?
Can all the home’s costs be paid from the purchasing partner’s current (and/or retirement) income? An older, financially secure couple (especially a two-income couple) may have been able to set aside funds to cover unexpected and/or major house costs, or access credit and pay it off promptly. A one income partner may not have access to the same savings or credit after separation, especially after retirement.
In summary, especially in the initial stages of separation, there may be a sentimental attachment to the family home and/or a wish to remain there to maintain at least some continuity while dealing with the other impacts of separation, but this wish must be tested against the new financial realities of separation. This is a difficult decision that will usually require legal and/or financial advice.
A Nova Scotia lawyer since 1986, Kay Rhodenizer grew up in Lunenburg County and recently moved to New Minas. As counsel at MDW Law, Halifax (www.mdwlaw.ca) she represents clients across Nova Scotia focusing on family law and estate dispute resolution. She can be reached at Kay@mdwlaw.ca