Often in divorce, the marital home is being sold or refinanced. In that case, at the sale or loan closing, there could be some property taxes and/or homeowners’ insurance that has been pre-paid into escrow. At closing or shortly thereafter, there would be a refund.

Generally, any refund will be issued to the mortgage holder. That could be one or both spouses. An overlooked asset is this refund payment and the fact the refund check is made out to both spouses or just one spouse could cause a dispute.

Here are two common situations that could arise:



  1. Post separation, the mortgage is still held jointly but only one spouse has been making the mortgage payments. It might be equitable for that spouse to keep the refund.


  2. Only one spouse is on the mortgage but the mortgage was paid with marital income. It might even be the other spouse (the spouse not on the mortgage) who is paying the mortgage payments! The house is sold shortly after the spouses separate. Because just one spouse is on the mortgage, the refund check would be issued in their name only. Most or all the refund is a marital asset and should be split.


Escrow refunds, especially in our world of rising tax and insurance rates, can be significant and should be addressed during the divorce process. The refund, if it has already been issued to just one spouse as in my second example, should be listed as an asset. The title company will issue a refund in accordance with the divorce decree if the divorce decree addresses the escrow refund. If the couple enters into a separation agreement that is not made part of a court order, then there is at least a contractual agreement as to how the refund should be split.

A Certified Divorce Financial Analyst included in your divorce process will address financial details such as the escrow refund. Attention to financial details such as this will sometimes create more value than the fees charged for their services!!!