Divorce and Your House - Splitting Your Assets

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Wow, what a tough subject to discuss...

For those of you that have never gone through the heartache and turmoil of a divorce, no explanation will suffice. For those of you that have "been there" no explanation is necessary.

Divorce affects everything in our life, whether we like it or not, especially if you have children. None of the decisions that you make during this time will be easy, but many decisions will be required of both you and your spouse.

I have been In the field of finance for over 20 years. I've worked for both Mortgage Lenders and Brokers, and have also been Real Estate Licensed. I have seen many fine people forced to work through these difficult issues.

One of the most difficult aspects of a divorce can be the splitting of your combined assets. This includes your home. Understanding your options and their potential consequences (good or bad), will help a great deal in arriving at the best solution for your circumstances.

First you need to decide who if anyone wants (or needs) to live in the house. Many times neither party wishes to stay in the home due unpleasant memories. Other times, the court may decide which party (if any) will stay in the house.

Here are the 4 fundamental choices as it relates to your home and mortgage. It is critical to fully understand the ramifications of each of these 4 choices, before making a decision.

  1. Sell the house and split the profits
  2. Buy the house from your spouse
  3. Sell your equity in the house to your spouse
  4. Maintain joint ownership

Sell the home and split the profits

The primary goal is to sell the home as quickly as possible for as much as you can reasonably get, considering your circumstances. And you MUST consider your circumstances. Here are a couple of reasons why.

If it takes an extended period of time to sell, will you both live there, even though you are going through or have just completed a divorce? That may make sense when you see your finances on paper, but it is very hard to do in the real world.

There is usually an extremely negative atmosphere in a home where two people wish to be apart. Especially after the attorneys "get through with you". If you think you had problems before court, just wait until the attorneys and judge get involved. If you do choose to sell the home and split the profits, it's probably wise for one of you to make other temporary arrangements while the house is for sale.

This also means that you should price the home reasonably, not expecting top dollar unless you can financially and emotionally afford to wait for a great offer on your home. Most people aren't in a position to take their time with the sale.

Remember that in the end the profits may not be equally divided. Factors that may influence the split include the terms of your settlement, the original source of the down payment, and the property laws in your area.

Buy the house from your spouse

Consider the income of your new household. Are you dropping from two salaries to one? Are you able to afford a similar monthly mortgage payment by yourself? If you wish to maintain the house as your primary residence, these factors must be addressed. Also, if the original mortgage is in both of your names, then you face the challenge of refinancing on your own merit. That means your credit history, job history and debt to income ratio.

Sell your equity to your spouse

This should provide you with funds to find another place to live. How much, will depend on the equity in your home after real estate commissions. There may also be tax implications that you will need to be aware of.

Make absolutely certain that you DO NOT remain on title if you have been bought out. You need to be taken off of the old mortgage and title if you were on it. If that isn't done you may remain liable for any late payments (ruining your credit), back taxes etc. (debt) that your ex spouse may incur.

Maintain joint ownership

You may choose to delay the decision regarding the ultimate possession of the home for a time, with one of you remaining as a resident. Although this may have no short-term financial ramifications, make sur to consider the potential tax consequences. From the original time of the divorce to the final disposition of the home, the tax obligations and deductions of the home can change.

Also be aware that in some states, in some circumstances, that your spouse may be able to obtain a 2nd mortgage on the home without you being aware of it!

If you found this article to be helpful, please forward it to other friends and family that may need the same information. Splitting assets properly and equitably can be a very difficult and emotional task. I wish you well in this endeavor.

If this article has been helpful please take the time to rate it, thanks!

 

Comments 28 comments

Men and Divorce 7 years ago

What happens when neither spouse can afford the house alone? What happens when you can't sell the house because of a bad market? What do you do when there is negative equity in your home because of tumbling housing prices? There are an infinite number of scenarios that can occur during a divorce that it is hard to acount for everything, but with today's economic conditions, the decision about what to do with the house is alot easier said than done!


callmesplash7 6 years ago

Good Info :O)


Walker Smith Way 5 years ago

really useful advice here. The subject off splitting assets is one that many divorcees need advice on, so I'm sure this will help plenty of Hub Pages users.


Rick Nischalke profile image

Rick Nischalke 5 years ago from Oregon Author

Thanks for the feedback and I'm glad you found the information helpful!

I just wrote a book called Fatal Divorce Mistakes, with an incredible amount of information for anyone going through a divorce.


edivorcecentral 5 years ago

great information. it's always good to be prepared to file paperworks for divorce pertaining to assets. some can be found at http://www.edivorcecentral.com


legalese profile image

legalese 5 years ago

Very informative. Dividing the equity in a marital home can be more difficult than ever due to the poor condition of most housing markets. Many couples may even find that they are upside down on the marital home-- raising the issue of dividing marital debts between spouses.


Rick Nischalke profile image

Rick Nischalke 5 years ago from Oregon Author

I agree, these are very trying times indeed.

And marital assets are just one part of the divorce equation.

I've just written a book called Fatal Divorce Mistakes. It covers multiple facets of the complex issues involved in a divorce, especially a high conflict divorce.

I wish anyone going through a divorce the very best. It is difficult at best and devastating at worst!


kada94566 5 years ago

Oh Rick, you make it sound so easy. I was married 40 years. We had a business but he took 10 years to hide everything he could. He did a good job.

I finally just had to let go and let God. Good luck with your writings. Kay


Rick Nischalke profile image

Rick Nischalke 5 years ago from Oregon Author

Kay,

I'm not sure what part I made sound easy. I would never describe any part of divorce as easy. :)

The entire process of a divorce is one of the most complicated, physically, emotionally and spiritually challenging events that anyone can ever go through.

I have certainly laid out some logical and viable solutions to part of a very complex problem. But as your own circumstances so aptly illustrate, "takers" are takers and refuse to govern themselves by the same rules as the rest of society.

High conflict personalities have an incredible ability to rationalize why they "deserve" to get their way in every situation. Look up the definitions of narcissism, borderline personality disorder, or antisocial behavior and you will understand a bit better what drives these people.

Thanks for your comment and I am sorry for your pain. I wish you the best and continued healing.

Rick


Kim 4 years ago

I wrote up my own divorce agreement. He had to buy me out on an amount I thought was fair for my son and I to get back on our feet. Now my question to you is, What do I do about taxes on that money? Because I don't want any surprises from the IRS. If you don't have the answer maybe you can point me in the right direction.

Thank You for your incite, Kim


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Rick Nischalke 4 years ago from Oregon Author

Kim,

Talk with a good accountant or tax attorney!

Make sure it's someone that is qualified to assess your situation in full, and to make the appropriate recommendation after reveiwing your entire situation.

Rick


Cheryl Soto 4 years ago

Does my xspouse receive all the cash, once I buy him out???


Rick Nischalke profile image

Rick Nischalke 4 years ago from Oregon Author

Cheryl,

There can be many extenuating factors in the division of assets.

In theory, if there is nothing else to consider it's simple math. If you are buying him out for x amount of dollars then that money is his.

If he has other obligations to you in the overall split, or has additional obligations to the government (taxes etc.), then of course that would affect how much he actually retains when it's all said and done.

I hope I have helped!

Rick


seekingclarity 4 years ago

I have a situation that I need to sort out. I was married for 35 years, then divorced my husband. During the final few years of the actual marriage, he was having employment problems, and signed a quit-claim on our beautiful house. That left me with a big mortgage to pay.

I sold the house and used almost 100% of the proceeds to buy a much smaller home in a less desirable neighborhood. About 2 years later, we got together again (I know, I know!)and 5 years later, we sold the smaller home and bought a nice home in our old neighborhood. That was 6 years ago.

We have never remarried. Both our names are on the mortgage. Since we have been in the new home, we have been separated once, and I have FINALLY learned that the divorce was a good idea after all---not financially, certainly, but emotionally.

I have found a smaller, one-story home for a good price in a nice neighbhorhood, and I "see myself" living there.

So--since nothing short of a nuclear blast will get him out of this home, especially with the mortgage amount being just about equal to the present selling value of the house, what are my best options?

I have some money from inheritance in money market accounts that could be used to pay deposit and set up a mortgage on the smaller house. "HE" has been officially paying the note on this house. I have been contributing 50% to the payment right from the start.

What options do I have here?


Rick Nischalke profile image

Rick Nischalke 4 years ago from Oregon Author

seekingclarity,

Talk with a good accountant or tax attorney!

Make sure it's someone that is qualified to assess your situation in full, and to make the appropriate recommendation after reviewing your entire situation.

It's very sad to think that both of you have invested the greater part of your life in this relationship only to end up in this position. I'm really sorry to hear that.

Rick


Help needed - original source of the down payment 4 years ago

I purchased a townhouse with my ex-boyfriend two years ago as investment rental property, I put down 88,000 downpayment, and he only put down 5,000 as downpayment. I have an email in writing from him that if we ever split up (which we did over one year ago) I will get back all my downpayment. But is that enough for me to hold him against this property? How do I protect myself as I want to sell this property or have it all transferred into my name? Thank you.


Rick Nischalke profile image

Rick Nischalke 4 years ago from Oregon Author

Again my legal disclaimer: I can not provide you with legal or professional accounting advice on this matter.

Having said that, this is one of those occassions when hind sight is always perfect! You should have had a legally binding document drawn up and signed when you first entered into this transaction.

My intent is not to make you feel bad about a mistake, but to help you learn from one. Expect the best in every situation but ALWAYS prepare for the worst. The cost to protect yourself would probably have been a few hundred dollars at most, yet you have $88,000 at risk at this point.

I would discuss your situation with an attorney as soon as possible. Find out if the limited paper work you have will provide you any protection at all for your investment.

Obviously by your question, you have a concern about your ex honoring your original agreement. Has he actually told you that he won't or are you just concerned that he might not?

If he does still intend to honor his original commitment, then you can tell him that you would like to work something out to either sell and split the purchase price (according to your original investment proportions) or purchse his equity in the property. But before you do that make certain that you have solid figures in hand to present to him so there is no ambiguity about what you expect regarding the percent of his equity. You may find that he hasn't altered his expectations and might even welcome being "cashed out" of this deal.

There are too many variables to cover here but he may agree to this without an issue. If he doesn't agree willingly than you may have legal recourse, especially if you have a banking paper trail as to where the original downpayment came from and the email that you have to support your claim.

Best of luck!

Rick


nick boston profile image

nick boston 4 years ago

I think married people should realize the impact of divorce before they would reach to a point of divorcing. I think it's better to weigh things right and solve concerns with the spouse before marriage comes to an end. Too many complications lie ahead of divorce for sure. Thus, if marriage problems can be fixed, then have it fixed.


Rick Nischalke profile image

Rick Nischalke 4 years ago from Oregon Author

Nick,

I couldn't agree more.

I wrote a book called Fatal Divorce Mistakes that talks about huge life changing mistakes that people make when going through the divorce process. One of the biggest mistakes someone can make is thinking that divorce is the easy way to deal with a difficult marriage.

But if a divorce is inevitable, they had better have the information necessary to protect themselves, their children and their assets. Especially a high conflict divorce or custody battle. Most people have no idea how dangerous or costly a divorce can be in terms of relationships and finances until it's too late and the damage is already done!

Rick


Nyamache profile image

Nyamache 4 years ago from Kenya

I have never liked the idea of divorcing but if it happens then couples have no alternative but to agree on matter regarding their joint properties and the care of children. I prefer selling the house and splitting the proceedings.


Angela 4 years ago

Our house is going to sell in about 30 days, the house is in his name and he says when he receives the payment from the house he wont be giving me a dime...


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Rick Nischalke 4 years ago from Oregon Author

Angela,

I wish I could tell you how rare that is but unfortunately it's not.

Many people make the mistake of assuming that their partner would treat them the same way they would treat their partner. That is a HUGE mistake.

Always have the appropraite paperwork filled out to protect yourself in any transaction no matter how much you may trust that person when you are going into it.

If they have a problem with that in the beginning, you would have gotten hurt in the end anyway.

Rick


Stew 4 years ago

I have a question.When she left she moved right in with her boyfriend,that I was unaware of.But this is it, right away I phoned someone to come out and give me some quotes on the house.Remax and Centry 21.So now that was 1 1/2 year,s ago I have had work done to the home since.Does she get half than or now works been done she get half now. It rasied the value quite a bit THANKS.


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Rick Nischalke 4 years ago from Oregon Author

Stew,

There are a variety of factors that can affect the outcome here. Whether you were married or not can make a difference. How long you were in that house together, who put the money up for the downpayment, if you had a written legal Agreement or not.

Without knowing all of the facts it would be hard to say but I can tell you what I would do. First, I would seek legal counsel from a seasoned attorney. I would document everything that happened before and after the split. I would show him or her all of the bills that I paid for the improvements.

In a perfect world, the additional capital you invested into the house since your split should factor into an equitable division of the proceeds from this asset. But remember, once you get involved with the court system you are no longer in a perfect world!

Best of luck,

Rick


Seeking clarity 4 years ago

I can see how in all of these situations, it all comes down to following the money and getting an attorney to represent, then cutting the losses, and moving on with one's life.

I have been procrastinating on this because I am in the age category of one who should be making the decision about choosing a home that will be my "last."

Our present home (described above) had a very large down payment that came from the sale of the home that I lived in after the divorce. It was, therefore, "my" home, and therefore "my" money in the eyes of the law.

We have made huge improvements and updates, that like all the other expenses, have been pretty much split 50/50.

I have just not had the time or focus yet to get down to it and draw up a deal. The upheaval of moving and "what the children and grandchildren will say" has been the obstacle.


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Rick Nischalke 4 years ago from Oregon Author

Seeking clarity,

Your right.

The legal part is essential, but easy compared to the personal pain and repercussions associated with divorce or the split of a relationship.

The ripples of a broken relationship go for miles figuratively speaking. It's never just the two people in the relationship that suffer from a divorce. It's the realtionship with children, friends & family that will also become altered or even shattered depending on the circumstances and severity of the split. I wish you the very best my friend.

Rick


3 years ago

Good info. will look for book & send this

to husband in hopes of him caring to read.


Rick Nischalke profile image

Rick Nischalke 3 years ago from Oregon Author

Great - best of luck!

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