Strength does not come from winning. Your struggles develop your strengths. When you go through hardships and decide not to surrender, that is strength.
— Arnold Schwarzenegger
Posted in Divorce, Emotions, Moving on, tagged Advice, Divorce, Ex (relationship), Family and Relationships, Happiness, Legal separation, Marriage, Recently Separated, Relationship, Relationships, Settlement (litigation) on January 3, 2014| Leave a Comment »
Strength does not come from winning. Your struggles develop your strengths. When you go through hardships and decide not to surrender, that is strength.
— Arnold Schwarzenegger
Here’s the gist…
On Wednesday, Britain’s top court ruled against an oil tycoon in a divorce case. The ruling stated that he has to give his ex-wife assets held by companies he owns.
Alison Hawes, a specialist family lawyer at law firm Irwin Mitchell, said the ruling meant “that business people cannot deliberately ‘hide’ their assets in businesses and corporate structures to protect them in the future in the event of a divorce.”
The court insisted it wasn’t establishing a general principle allowing courts to “pierce the corporate veil” and seize assets in divorce cases. But legal experts said the judgment was still significant.
“The Supreme Court has handed down a landmark decision in which, for the first time since at least the end of the 19th century, it has accepted a general exception to the rule against ‘piercing the corporate veil,'” said Michael Hutchinson, a partner at law firm Mayer Brown.
“This is an extraordinary decision and the implications for corporate governance are potentially huge.”
Associated Press UK Top Court Rules Against Oil Tycoon in Divorce
While the article states that the ruling potentially impacts wealthy couples, you don’t have to be wealthy to have a company in which you can “hide” assets. If it’s something you’ve thought of doing, beware….
Posted in Divorce, Money Issues, tagged Advice, Divorce, Finance, Frank McCourt, Jamie McCourt, Marriage, money, Personal finance, Recently Separated, Relationship, Relationships, Settlement (litigation) on May 8, 2013| Leave a Comment »
Posted in Divorce, Money Issues, tagged Advice, Certified Divorce Financial Analyst, Divorce, Money Management, Pension, Personal finance, Recently Separated, Relationship, Relationships, Settlement (litigation) on November 26, 2012| Leave a Comment »
This article is really long, but it’s worth reading and while it’s not meant to be an ad for Certified Divorce Financial Analysts, it shows the value of having someone on your side who can help you understand the financial implications of possible divorce settlements.
Divorce: What’s his, what’s hers
Two weeks after his divorce, Phil Doughty received a blunt letter from his ex-wife’s lawyer. It informed him he’d contravened his settlement by not giving his ex her $100,000 share of his pension within 10 days of the divorce.
“It was a knockdown punch,” says the retired teacher from Montreal. “I had no idea I had to pay her right away, or that the money would come directly out of my pension fund.” Doughty thought his ex would simply get a share of his benefit after he stopped working. “I’d never heard of a company taking money out of a pension eight years before retirement.”
With his pension fund depleted, Doughty’s monthly cheques were reduced by over a third when he eventually retired, yet he was still required to pay spousal support from what remained, leaving him strapped. “I had to find another lawyer to help me get out of those support payments I couldn’t afford anymore.”
Doughty (we’ve changed his name, and those of all the featured subjects in this article) believes his pension arrangement should have been handled differently – at the very least it should have been explained to him properly. “I guess it was just something the lawyers worked out between them,” he says. “My lawyer and I never really talked about the pension.”
It seems hard to believe a lawyer would not talk to a client about how such an important asset would be divided, but Doughty insists he would have remembered such a conversation. His situation is just one example of how partners frequently get divorced without understanding all the financial implications.
“Divorce changes a person’s financial situation dramatically and often there is no planning for it,” says Debbie Hartzman, a Certified Divorce Financial Analyst in Kingston, Ont., and co-author ofDivorce Isn’t Easy, But It Can Be Fair. (CDFAs are planners with additional training in the financial impact of separation and divorce. See “Where to get help,” at the bottom of this page.) “I’ve had clients say things like, ‘I just spent four years fighting with my ex, I have this cheque for $400,000, and I have no idea what that means in terms of my financial future.'”
Surely part of a lawyer’s job entails discussing financial matters surrounding divorce. Apart from custody of children, aren’t money and property the big issues in divorce? “A family lawyer’s job includes giving advice about a number of financial issues, but we are not financial analysts,” says Bruce Clark, who observed many divorce-related financial problems during his 35-year career as a family lawyer in Toronto.
Lawyers may not anticipate the long-term implications of divorce-related financial matters. For example, Hartzman explains it’s possible to have different divisions of assets that all meet the 50/50 requirements of the law but have profoundly different financial consequences for the divorcing partners. Her book includes a case study that presents different ways to legally divide the assets of a middle-class couple. Both are 58 years old, and the largest assets are the house and pensions (his is four times more valuable than hers). In one scenario, the assets are split more or less equally, so the initial net worth of the two partners is about the same. However, her share of the man’s pension is paid out as a lump sum, and the support payments are not structured to reflect the fact his post-retirement income will be higher than hers. As a result, after age 65 the woman’s net worth and monthly cash flow flatline, while the man’s relative financial situation steadily improves. “The person with the pension can end up in a much better financial position than the person with the house, particularly if the pension is indexed to inflation,” says Jim Doyle, a CDFA with Investors Group in Vancouver.
Here’s a different scenario: she keeps the house and gets only a quarter of his pension. To the untrained eye that seems to be simply an alternative way of dividing the pie equally. Yet this arrangement ensures the woman’s net worth stays similar to the man’s for the rest of their lives, without diminishing his financial situation.
Of course, case studies do not translate into rules that ensure ideal financial arrangements for every divorcing couple. That’s why it’s a good idea to consult a financial professional as well as a lawyer if you’re going through divorce or separation.
Don’t assume every asset must be split down the middle. “People often want to split up each individual asset, but not all assets are created equal. It’s usually better to look at assets in terms of how to divide the whole cake,” says Hartzman.
Doughty is not the first divorced person to be subject to pension shock. Many people don’t even realize pensions have to be shared after divorce, says Clark. “In my experience, most people consider their pensions to be their personal property, as opposed to an asset that must be shared equally after a divorce. In a longer-term marriage the pension is often the single biggest asset.”
This was the case for Doughty and his ex-wife, who had sold their matrimonial home shortly before separating. By law his ex-wife was entitled to half the teacher’s pension that accumulated during their marriage.
“Pensions are very, very complicated assets,” says Sharon Numerow, a CDFA and divorce mediator with Alberta Divorce Finances in Calgary. “Defined benefit pensions must be independently valued by an actuary, and the rules about paying out a spouse vary from province to province.” For example, in Alberta there are no longer any provincial pension plans that allow monthly payouts to an ex-spouse when the member spouse retires. Therefore, the only option is to give the ex-spouse a designated value that is transferred into a Locked-In Retirement Account or LIRA (called a locked-in RRSP in some provinces). “This almost always has to be done after the separation agreement is signed, and not usually at retirement,” says Numerow.
On the other hand, Ontario recently adjusted its Family Statute Law in the opposite direction. Now a portion of a person’s pension payments can be made directly to an ex-spouse after retirement. Another possibility is for the spouse without the pension to get another asset equal to the value.
Bottom line, don’t underestimate the potential for misunderstanding pension division. It’s important to work with your lawyer to understand the legal issues, then talk to a financial planner who can help you appreciate the short-, medium- and long-term implications of the division of this and your other assets.
Another key, says Hartzman, is determining whether it’s viable for one partner to stay in the family home. There are two main questions: Can one partner actually afford to keep the home? And how will keeping the home affect that person’s financial future?
“Most people I’ve worked with live in houses that require two incomes, so after divorce one person would be trying to maintain the home on half as much income, and often it just isn’t affordable,” Hartzman says. “Can you imagine how hard it is to tell someone already going through the emotional turmoil of divorce that they can’t afford to stay in the family home they and their children are so attached to?”
Sandra Baron, an Ottawa mother of two, did manage to stay in the matrimonial home after her divorce. A financial planner helped her figure out how to pull this off. “My first lawyer really didn’t seem to understand my financial situation,” Baron explains. “I went to see a financial planner and asked if I could afford to buy out the matrimonial home from my husband. He helped me work it out.”
Baron and her spouse had always lived within their means. They had no debt other than a mortgage with much lower principal than they qualified for. That, combined with support payments and Baron’s earning potential (she had been an at-home parent most of her marriage but began doing contract work after the divorce), meant she was able to keep the family home.
The financial planner also gave Baron some tax-saving advice on how to invest some money she had brought into the marriage. Since she had that money before the marriage and kept it in a separate account, it was not an asset that had to be shared equally. However, had she used that money to help pay down the mortgage, it would have become part of the value of the matrimonial home and therefore a joint asset.
This is also the case if one spouse receives an inheritance or gift during the marriage. In most provinces, as long as the money is kept in a separate account it does not have to be divided equally after a divorce. But if it is used to purchase a joint asset, such as a house, it becomes the property of both spouses. (In some jurisdictions growth in the value of the inheritance or gift may count as an asset to be shared.)
Perhaps the biggest factor in Baron’s situation was that she and her husband actually saved money for their separation. “It was almost five years from the time we realized the marriage was likely not able to be repaired that we saved for the eventual separation. Unless the relationship was harmful, I felt it was in the best interest of everyone – particularly the children, who are all that really mattered in the end – to plan and wait so things would be better for them financially.”
It’s a safe bet the path Baron and her ex-husband took is not typical of divorcing couples. Obviously they got along well, even after deciding to separate; they had no debts other than the mortgage and were both well acquainted with their family financial situation. The opposite is much more likely, says Numerow. “It’s common for one partner to know very little about the family finances, and they often don’t know the extent of their debts.”
When Anna Masters, of Taber, Alta., separated from her husband she moved in with her sister and started a new job at a bank. She also applied for a new credit card through that bank, so the person doing the credit check was one of her colleagues. When the Equifax credit report came through, the coworker quietly asked Masters to step into her office. “You are behind in all your bills and credit cards. Most of them are in collections,” the embarrassed colleague said.
“I was horrified,” says Masters. “Even the cell phone bills weren’t paid. I didn’t even know my ex had his own cell phone.”
That’s not the worst of it. Masters’ ex-husband had a line of credit she didn’t know about it, which listed her as a co-signer. Masters says he must have forged her signature on the application.
It’s not hard to find similar tales of woe. Alan Leclair of Winnipeg tried to remortgage his house not long before he and his wife split up. “When the credit check came in the banker said to me, ‘You’ve got debts you didn’t tell me about. You’d better go home and talk to your wife about it,'” says Leclair. These debts were considerable – between $30,000 and $40,000 in unpaid credit card balances. Fortunately, Leclair’s ex-wife eventually agreed to take responsibility for them.
Masters was less fortunate. She got stuck with a big chunk of debt – loans and credit cards her husband was supposed to pay off, but didn’t – as well as the line of credit he’d fraudulently put her name on. “I could only get part-time work at the bank, but I worked every other junk job I could find. It took me three years, but I paid off my share, and in a way I’m glad I went through the experience. I’m in control of my finances now,” Masters says.
The one smart thing Masters feels she did in the lead-up to her separation was to start setting aside money (“Omigod money,” she called it) so she’d have something to fall back on in an emergency. “Even before I realized the full extent of the financial mess we were in, I knew my ex was spending irresponsibly, so I started squirreling money away.” That money – about $3,500, which she kept in a sock hidden under a pile of towels in the linen closet – ended up being used to cover her living expenses during a spell of unemployment after moving to a new town after she was separated.
Leclair did something similar. “I had a friend who was going through a divorce and I asked him for advice. He said, ‘Put a few bucks away.’ So I did.” He hid cash in his house and even left about $500 at a friend’s house. “When the separation happened I was in scramble mode, dealing with all kinds of things. It was comforting to at least know that money was there,” he says.
Clark, the family lawyer, explains any money you stash prior to separation “will still be subject to division, but you will have the use of it while property issues are being sorted out. There is nothing illegal about this as long as you declare the amounts you have put aside.”
It’s hardly surprising that people have trouble working through issues like asset division and debt. But the path to divorce is laden with other potential financial mistakes.
One is trying to settle too fast. “People want it settled tomorrow,” says Jim Doyle, the financial planner. “Emotions often determine the choices rather than making the numbers make sense. I say to people, ‘Let’s slow down and do the math.'” He says it’s common for partners to make hasty, ill-advised decisions about asset splitting just to avoid conflict. “Sometimes in relationships where there is an imbalance of power, one person might simply capitulate, resulting in a financial decision that may have negative consequences down the road.”
Don’t ignore the tax implications. “One of the biggest items that is often overlooked in separation and divorce agreements is tax deductions, such as child-care expenses, and credits that may apply to separated and divorced parents,” says Numerow. For example, a divorced parent can claim one child as a dependent, but both parents cannot claim the same child.
Another dangerous road is trading property for time with children. “Big mistake – just don’t do it,” says Numerow. In addition, remember that spousal or child support and asset division are, for the most part, completely separate issues.
Finally, if you’re a common-law spouse, don’t assume the process is the same as it is for married couples. Generally, legal requirements regarding spousal and child support are the same, provided a couple has been living common-law for at least two years (three in some provinces). However, the division of assets is not automatic, as it is in a marriage, which comes as a surprise to many people, Numerow says. “Go to a lawyer and find out what you do and don’t have to share. Laws concerning common-law separations vary by province.”
One message Clark, Numerow and Hartzman all want to get across is this: both partners should always be aware of the family’s financial situation. If one partner is more hands-on with the money, the other at least needs to understand the big picture. “I’ve met a lot of spouses who weren’t involved in the finances and they’re ashamed,” says Numerow. “I tell them, ‘Don’t beat yourself up over it. Now is the time to begin your learning.’ However, if both partners were on top of the family finances it would make divorce a lot easier.” – written by John Hoffman
Certified Divorce Financial Analysts usually charge between $175 and $250 per hour. “If people do their homework and bring in all the relevant financial information, we can usually get a fairly good handle on the situation in two hours,” says CDFA and author Debbie Hartzman. “For an individual, it usually takes no more than three hours overall. With couples it usually takes three sessions of an hour or an hour-and-a-half each.” She notes that a better understanding of your financial situation can save your lawyer’s time, which is much more expensive.
To find a CDFA, do a web search for your town and CDFA, or visit the website of the Institute for Divorce Financial Analysts (www.institutedfa.com) and search by city, town or area code.
Source: Divorce: What’s his, what hers
Posted in Children and Divorce, Divorce, Money Issues, Moving on, tagged Advice, childsupport, Divorce, Family and Relationships, Family law, Finance, Legal separation, Marriage, money, Money Management, Parent, Personal finance, Recently Separated, Relationship, Relationships, Settlement (litigation) on October 3, 2012| Leave a Comment »
Welcome to money-issue Wednesday.
The article we’ve reposted below has some great advice that lots of people don’t realize until it’s too late. Keep your emotions out of the process and pay attention to what it has to say before it’s too late for you and your children.
Managing Finances Through a Divorce
by Andrea Murad
Divorce is a trying time for anyone—especially when children are involved.
The separation process is long and filled with paperwork, especially when it comes to sorting out finances and budgeting for separate households. Experts advise parents strive to maintain their children’s lifestyle during and after the divorce to keep a sense of normalcy and planning a budget for potential custody or child support will help to make the split easier for all parties.
The problem in every divorce is that you have the same income but two households, says Randy Kessler, founding partner of Kessler & Solomiany. “Very few people make enough money to support a child the way they want to.” Lawyers and judges try to fix this problem by determining the minimum amount one parent can accept and the most the other can afford to pay for their children.
“Before you break up, become a better parent—take your kid to school, make them lunch,” says Kessler. Spending time with your kids as well as staying calm and saying nice things about the other parent, will help the custody case process.
Before heading into the legal process, work to create the custody outcome you want, recommends Kessler. If a judge has to make a decision about custody, he or she may keep the parents’ current arrangement. “If they share the child like they would in a divorce, they don’t have to pay a lawyer.”
Understand How Much your Child Costs
Maintaining a child’s lifestyle post-divorce requires parents to negotiate expenses and child support. “Every state has guidelines so a judge has a starting point for child support,” says Kessler. A judge will calculate child support and explain any deviation from the guidelines because of, for example, housing, extreme travel costs, medical needs or tuition for a child requiring extra training because of a learning disability.
Child support can be adjusted up or down after the divorce since a person’s income can change due to a raise or job loss. To avoid future trips back to court, Kessler suggests making payments a percentage of income.
To know how much you spend on your child, review 12 months of bank and credit card statements, says Tracy Stewart, certified public accountant and personal financial specialist in College Station, Texas. “Break down expenses for mom, dad and the children into categories like clothing, groceries, transportation and dining.” Also include summer camp and other activities. For categories like groceries that are shared by family members, figure out each person’s percentage of expenses. Adding up the numbers will help create a baseline for the money spent on your children in the last year.
It’s important to be clear about your expenses and that you’re able to live within a certain budget, says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial. “In general, the court will ask you for budgets or for you to provide records to help determine the amount of child support payments.”
While you review your child’s expenses, experts suggest examining your budget as a single parent. As a general rule, Jonathan Clements, director of Financial Education for Citibank, suggests keeping fixed costs like housing, utilities, food, insurance and property taxes at 50% of pre-tax income. The great litmus test is whether you can save on a regular basis—if you can’t, your expenses are too high and you’re probably spending too much on housing, says Clements. “You want to live within your income reasonably comfortable. Your finances will spiral out of control if everything is too tight.”
Experts suggest deciding whether you can spend the same amount of money on your children after the divorce. “If [child support] plus your income isn’t enough to maintain your child’s lifestyle, you’ll have to make tradeoffs for your child or yourself,” says de Baca.
Financially Protect Your Children
Consider insurance polices. The parent paying child support should have a life insurance policy, as well as disability insurance, recommends Stewart. The life insurance beneficiary should be the children or structure the policy such that the money is used to raise the children. Disability insurance will replace lost income if the person paying child support becomes disabled.
Negotiate medical costs. “You’ll want to look to the working parent to put the children on their health insurance,” says Stewart. Decide which parent will pay out-of-pocket expenses and how you’re going to pay and reimburse each other.
Prepare for the Future and Begin to Co-Parent
You’ll have to make joint decisions for your children years after the divorce, says Stewart. In the future, they may have to discuss whether to send a child to summer camp of if a child can get a car, cell phone or tattoo. “You want the parents to be able to come to an agreement on these things in the future years. You cannot predict some expenses at the time of the divorce because you won’t know what can occur in the future.”
“Depending on the divorce situation, your spouse may not want to talk and the judge may decide on guideline support,” says Stewart. Parents who aren’t talking during the divorce may not talk after, which makes for uncomfortable parenting.
Although divorce is enormously upsetting, Clements doesn’t suggest funneling your emotions into the battle over finances—everybody ends up worse in this situation. “You want a reservoir of goodwill because you’ll need to ask your ex to watch the kids. If you have a nasty divorce, a flexible parenting agreement is likely to be impossible.”
Posted in Divorce, Emotions, Money Issues, Moving on, tagged Advice, Asset, Divorce, Ex (relationship), Family and Relationships, Finance, Happiness, Marriage, money, Money Management, Personal finance, Property, Recently Separated, Relationship, Relationships, Settlement (litigation) on September 19, 2012| Leave a Comment »
Welcome to money-issue Wednesday.
Today we’re posting an article we found on Forbes.com that addresses a big problem divorcing couples seem to have, no matter how big or small the asset. The examples given in the article happen to have assets that are worth a lot. But don’t stop reading thinking that this article doesn’t apply to you. The lessons learned apply to everyone.
How to Handle Difficult to Divide Assets
by Jeff Landers
Divorce involves the division of marital property. From the imported porcelain vase Aunt Martha gave you and your husband on your second anniversary to the vacation condo you both bought while you were in Costa Rica just last year, it all must be split according to the rules in your state.
Naturally, some items will be easier to divide than others. Maybe you’ve decided you never want to vacation in Costa Rica again, and you’d rather have a larger portion of the stock portfolio, instead (provided you understand the cost basis of each asset and what the tax implications will be upon a sale, of course). Or, perhaps your husband has absolutely no interest in your family’s heirloom china.
With a qualified divorce team you’ll be able to work through all these nitty-gritty details, and in most cases, negotiations should proceed in a productive and timely fashion (for the most part).
However, every now and then, the division of marital property can become enormously complex. Some couples jointly own “priceless” art or huge, multi-faceted entities, such as professional sports teams. For them, divorce proceedings can take years . . . and unfortunately, the process can get ugly.
Case in point: The divorce between Frank and Jamie McCourt, who co-owned the Los Angeles Dodgers –or, at least, at one point, the Courts decided they did. Read this excellent re-cap of the McCourt divorce debacle, and you’ll learn that alleged mistakes in the couple’s marital property agreement (signed during the marriage) left ownership of the Dodgers in question. Remarkably, even though it appears the original agreement was for Frank to own the baseball franchise and Jamie to own everything else, certain copies of the documents actually said otherwise. Ultimately, a California court awarded Jamie half of the Dodgers, but as is so often the case in disputes like this, that initial Court ruling was only the beginning of a long and bitter story. (See hereand here, e.g.)
In sharp contrast, the co-owners of the Philadelphia Eagles recentlyannounced they’re divorcing, but said they’re committed to a continued “team effort” both on and off the field. Likewise, it seems as though Julia Calhoun and retired Microsoft executive Christopher Larson had hoped for an amicable divorce –until emotions flared over their art collection, valued at a cool $102 million.
What lessons can be learned from these cases involving difficult-to-divide assets?
Here are the key points you need to consider:
● Your best offense is a good defense. Marital property and/or postnuptial agreements (including the establishment of trusts) signed during the marriage clarify who owns what.
Even though the thought of divorce may be the furthest thing from your mind while you are drafting an agreement, it’s essential that you consider “the possibility” of a future breakup while you are establishing the terms. Will your assets be protected from your husband (or other unanticipated recipient) if you divorce? Are the proper safeguards in place?
● “Selling it all” to split the proceeds is not always a viable option.As Ms. Calhoun and Mr. Larson discovered, sometimes the tax implications and/or other associated costs of selling certain assets outweigh the benefits of liquidation. Make sure you fully understand all potential financial consequences before you agree to “sell it all.”
● Not all assets that are valued the same are actually worth the same. This point can be particularly relevant if you’re deciding whether or not you want to keep your marital residence. Here’s an example to illustrate my point:
Let’s say you’re trying to decide whether to keep a $600,000 bank account or a $600,000 house that’s completely paid off. You really love the house, and you’re leaning in that direction. Great idea? Maybe. But, you need to carefully assess how the house will impact your bottom line –both now and years down the road. Even mortgage-free home ownership involves expenses, such as real estate taxes that need to be paid every year, upkeep and maintenance, fuel costs, etc.
In addition, when you eventually sell your home you may be hit with a big capital gains tax bill. Let’s assume you bought the home for $200,000, and it’s now worth $600,000. Your capital gain is $400,000. Subtract your $250,000 capital gains exclusion as a single person, and you’ll have to pay capital gains tax on $150,000. At the current capital gains tax rate of 15 percent, that amounts to a $22,500 tax bill! (And chances are pretty good that those tax rates will increase in the near future.)
Once you complete this type of analysis, the cash may look like a much better option than the house.
● Thinking Financially, Not Emotionally® is always optimal. You may think you can’t possibly live without your beachfront getaway, that antique watch or the impressionist painting you see every evening in the dining room. But the truth is this: You can. I’m not saying you have to; I’m saying you can.
I understand that maintaining emotional distance when it comes to negotiating certain assets may not be easy. But if you can successfully do so, you’ll put yourself in a better position to strategically manage your marital property and develop a comprehensive plan for financial stability and security in the future.
Posted in Divorce, Money Issues, Moving on, tagged Advice, Community property, Deed, Divorce, Finance, Marriage, money, Money Management, Personal finance, Property, Real estate, Recently Separated, Relationship, Relationships, Settlement (litigation) on September 5, 2012| Leave a Comment »
Oh my, my. This must be the most confusing title we’ve ever written.
But if divorce real estate law were easy, we wouldn’t be writing about it.
Hi. Welcome to money-issue Wednesday.
It’s common these days to find couples who own homes together. But then the couple doesn’t live happily ever after and ends up getting a divorce. If you’re reading this, you may have wondered, “Should the deed be changed?”
In an attempt to answer that question, we’re going to give you advice from two different sites.
The first comes via the Minnesota Courts — Top 7 Mistakes with Real Estate During Divorce. The seven mistakes are (as seen in the article).
|1. Not listing the real estate in the Summons and Petition.|
|This might prevent you from getting a divorce, might prevent you from selling the property until you go back to court to amend and correct the decree, might result in your spouse getting more of a share in that property, and other problems.|
|2. Not using the correct “legal description” for the property, or using the street address instead of the legal description.|
|You may have to amend the Divorce Decree before you can refinance or sell the property.|
|3. Having verbal or written “side” agreements about the property that are not part of the divorce decree.|
|These are not enforceable and if your ex-spouse changes his/her mind, you are out of luck.|
|4. Assuming you are not responsible for the mortgage because your ex-spouse was awarded the house.|
|The court cannot order the lender to take your name off of the mortgage. Being on the mortgage is between you and the lender. Having your name on the mortgage for a house awarded to your ex-spouse may prevent you from qualifying for another mortgage. If your spouse fails to make payments on the mortgage, the lender may try to collect from you.|
|5. Deeding the property between spouses before the divorce is final.|
|Some people think that if their spouse is not listed on the deed for the property, the property does not need to be part of the divorce proceedings. There are two mistakes here. First, all real estate is part of the divorce proceedings, even if the deed is in only one name. Second, a deed between spouses during the marriage is not effective. Under the law, a spouse has a “marital interest” in all real estate owned by the other spouse. You cannot deed away that marital interest while still married to each other.|
|6. Not paying attention to the marital and non-marital parts of the value of a house.|
|You could be short-changing yourself by thousands of dollars.|
|7. Adding or changing language in the divorce papers without consulting an attorney.|
|You should change the court forms to meet your needs, but you also should get an attorney to help you. Real Estate law is very technical and exacting. You are highly likely to make serious mistakes if you try to address the real estate issues without competent legal advice. It is foolish to save a few dollars now and cause yourself trouble and expense later. Some mistakes can be corrected. For example, if you make an error in the legal description of the property, it is possible to go through a procedure to “amend” the Judgment and Decree to correct the legal description. Other mistakes cannot be corrected. For example, if you agree to sell the house and divide the net proceeds 50-50% with your spouse, you cannot ask to amend the decree later on the basis that the division was unfair because you paid $50,000 of the downpayment on the house with your non-marital money. Many attorneys are willing to review divorce papers for a reasonable fee. Just remember to show the papers to the attorney before you sign them or serve them on the other party.|
Make note of all 7 because making any one of them can lead to problems and added expenses later.
If you live in California, you’ll be interested in this response to a question about property listed as community property.
I am recently divorced. My ex and I still own a house together, listed on the deed as community property with rights of survivorship. Is it necessary to change the deed? If so, how should we be listed?
Yes, you definitely need to execute a new deed. Retitling the property will save time, energy and expense later.
In California, community property is a form of ownership exclusive to married couples and registered domestic partners. Because you are divorced, you and your ex can no longer own real estate as community property.
If your property agreement does not specifiy how you own the residence following the divorce, you will need to agree on how to hold title going forward.
If a lawyer assisted you with the divorce, ask him/her to prepare a new deed.
In general, you can own the property as “tenants in common” or as “joint tenants.”
If you own the property as tenants in common, each of you can dispose of your half as you wish now or in your will/trust. This means one of you could co-own the property with someone else at some point.
Also, as tenants in common, you can own unequal interests in the property.
If you own the property as joint tenants, you must own equal interests in the property. Upon the first of your deaths, the other will automatically inherit the decedent’s property share.
Depending on your relationship with your ex and how you plan to use the property, you may want to consider a Tenancy in Common Agreement that sets forth terms and conditions for management, upkeep and use of the property.
An attorney can help determine the best form of co-ownership for your situation, as well as prepare any additional documentation.
How have you handled joint property issues?