DIVORCE AND REAL ESTATE
© 1997-2003 Wolf Hollow Publishing, Publisher of Divorce Strategy
Divorce and Your Real Estate
Dispostion of the family home frequently causes
problems in a divorce. Custodial parents may want to
hang onto the home for the sake of the children.
Perhaps one or both spouses can't afford to purchase a
similar replacement home. Much depends upon the
amount of equity in the home and the ability of each
spouse to keep it.
The following is a portion of a chapter from Divorce
Strategy that contains information to get you started
on the road of evaluating your divorce decision about
your real estate.
For most couples the family home is the highest valued
asset they will have to divide in their divorce. Its
division is usually fraught with controversy for varying
reasons. It may be difficult to value, is not readily
converted to cash, costs a substantial amount of money
to maintain and has implications of federal and state
tax liability. As if all those things were not enough, your
family's emotional attachment to your real estate, in
particular a family or vacation home, can cause you to
make an irrational or poor decision at the time of the
divorce. Your family may be haunted by that decision
for years after your divorce.
Some questions that you need to answer are:
Should you sell the family home?
Do you keep it until the children are grown?
Should you keep the home and buyout your soon
to be ex-spouse, or vice versa?
Can either of you afford to keep it after the
divorce?
The answers to these questions and others can help
you avoid or plan for problems associated with your
real estate. Historically, the family home is the asset
that most often causes controversy both before and
after a divorce.
The principal reason for this problem is the timing of
the sale of the home and the division of the net
proceeds. Both events frequently occur some time after
the divorce. In addition, couples seldom plan as they
should for the payment of household maintenance and
upkeep during the pendency of the divorce. At first
glance the family home appears to be the easiest asset
to identify and describe. For purposes of a divorce, the
description of your ownership interest in your home
and other real estate can be very complicated with
pitfalls for the unwary. As with the division of personal
property, the rules and laws regarding the division of
real estate vary from state to state. Consult with your
lawyer about your rights and responsibilities after you
have read this section and put together your
worksheets.
Before you see your lawyer, gather the necessary
documents and records about each piece of real estate.
Get the documents not only for the property titled in
your name, but for all the property in which you or
your spouse has an ownership interest. This includes
property that you own in either of your names alone,
jointly with another person or property owned by a
trust or business in which either of you have an
interest.
Key Factors<
There are six key factors about your real estate that
affect the handling of the asset or the distribution of the
net proceeds from the sale of the asset in a divorce.
The factors are:
identification of the type of real estate and the
type of ownership interest you have in the
property
the ownership history of your real estate
real estate, income and capital gain taxes
debts, such as loans and tax liens, that are
secured by the real estate the value of the real
estate
the plans you must make to pay for and maintain
the real estate during the pendency of the divorce
and afterward
The following sections describe in detail these six
factors.
Identification
As previously mentioned, most couples own an interest
in real estate in the form of a family home. Other types
of real estate that you may own are vacation property,
rental property, commercial or office buildings,
buildings on land leases, vacant land, mineral rights and
other types of special use real estate. Whatever type of
real property you may own, each one has unique
features that could affect how you can utilize it in your
divorce, especially in the context of a settlement
agreement. The following sections of this chapter
contain examples of some of the methods you might
use.
How you hold title to the real estate may determine, in
large part, what interest you and your spouse have in
the real estate. Most married couples own property as
tenants by the entirety and each spouse has an
undivided one-half interest in the property. A divorce
ends the ownership in tenancy by the entirety. Joint
tenancy is similar to tenants by the entirety except
that the owners are usually not married to one another.
In joint tenancy and tenants by the entirety, if one of
the owners dies, the deceased person's interest passes
to the other owner by operation of law. Another way of
holding title is as tenants in common. The interest
owned by each tenant in common is divisible and can
be inherited by the owner's heirs. This is customarily
the way that unrelated persons, including divorced
people, own real estate together. It may be the way
that you and your ex-spouse own your real estate after
the divorce.
History of Ownership
It is important to establish and document the history of
your real estate ownership because each parcel's
history affects the property's net worth. For example,
real estate has tax implications that are usually
assumed by the person receiving it in a divorce.
Additionally, the history of your real estate helps you
determine if the real estate that was owned before the
marriage or inherited during the marriage is marital or
separate property. Finally, the history of the land
usage enables you to analyze the financial and
environmental risk, if any, you could incur from owning
the property.
Prepare a history of your home ownership for each
property you have owned, including those which you
have sold. Make notes about any miscellaneous
information that is important about the real estate. Put
together any source documents you used to back up
your information. Organize your documents so that
your history table is the first document in your real
estate file. Then attach the supporting documents in
descending or ascending order to the file folder. Some
of the relevant information you need for each piece of
real estate is:
Address, purchase price and date purchased
Down payment amount and source of funds for
the down payment
Original loan amount and current balance
List of improvements you have made and their
cost depreciation claimed on any prior year's tax
return
Insurance proceeds received from any claim
Costs to repair any damages or restoration costs
Date sold, sale price, costs of sale and net
proceeds
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