Divorce and property values (how to settle on a value with your soon to be ex-spouse)
Article Source: Carpenter Law, P.C. www.carpenterlaw.com
<-- Return to News, Articles and Resources
What are Divorce Appraisals?
In a divorce, there are many important decisions that have to be made, including "Who gets the house"? Usually the
house is either sold and the profits are split, or one party can "buy out" the other. In either case, one or both
parties should order an appraisal of the property. Divorce appraisals require a well supported, professional
appraisal that is defensible in court
Attorneys and Accountants rely heavily on the values when calculating real property values for estates,
divorces, or other disputes requiring a value being placed on real property. We provide appraisal reports
that meet the requirements of the courts and various agencies.
If you’re thinking about separating from or divorcing your spouse, here are
some practical steps you can take now to ease the transition once the separation occurs:
Open a checking and savings account in your name only, and transfer money from joint accounts
into your own accounts.
If you don’t have credit cards in your own name, now’s
the time to apply for them and establish your own credit with any service provider you’ll need after the
If you can afford it, establish a relationship with a therapist or counselor
you’re comfortable with. At a minimum, strengthen your ties with close friends and family, and be
honest with them about your marital problems.
If you don’t have your own health
insurance, find out whether it’s possible to continue coverage through your spouse’s insurance
until the divorce is final. At a minimum, get needed medical and dental work done while you still have insurance
Collect and make extra copies of all financial information (tax returns, business records, bank
account records, investment records, deeds, mortgages, employee benefit information, debt records, etc.) while
you still have access to it. Put this information in a safe place outside your home.
and make extra copies of any prenuptial agreements, community property agreements or powers of attorney and put
them in a safe place outside your home, such as a safe deposit box in your own name.
you’re not currently working, update your resume and begin thinking about what type of work you could do.
Start the training or retraining you’ll need to get yourself back into the workforce as soon as
Most people going through divorce resolve at least at the beginning that they're
not going to lose control of themselves, their temper, or their legal bill. And the good news is that most
people keep these resolutions. That is, they quietly get about the cruddy, painful business of ending their
marriage. They don't spend hours in court, they don't run up thousands of dollars in legal bills, and
they're able to get through the pain and get on with their lives.
But there's no question that some
people do make mistakes in divorce — big mistakes. And unfortunately, because of the nature of divorce,
we often have to live with those mistakes for years — sometimes even for the rest of our lives.
Here are the most common missteps and some ways to avoid them:
Giving up control of the
divorce — usually to your lawyer. Your lawyer is a professional; he or she is trained to represent
your interests in court, and you need to listen carefully to the advice your lawyer gives you. But this is
not your lawyer's divorce. It's yours, and you're the one who's going to have to live with the
Dividing up property without a thorough inventory. I see it nearly every day.
Before you begin negotiating, you must build a thorough inventory of what you own and what you
Spending too much time and money letting lawyers gather information. The legal term
for this is “discovery,” and it includes interrogatories, requests for the production of documents,
requests for admissions and depositions. Lawyers love discovery. It turns little cases into big cases and
keeps the lawyers thoroughly in control of your divorce. Better to gather the information some other way
if you can. You and your spouse might be able to simply exchange the information you need. You could use
mediation to help you share the information with each other. Before you even go to see the attorneys or
mediators, you might consider using a financial preparation kit to help you calculate the after-tax value
of your house and other real estate as well your vehicles, household belongings, stocks, bonds, IRAs,
retirement plans, and other financial assets.
Letting your family or friends tell you
what you need, and even sometimes what you should be feeling. Remember, this is your divorce. No one, and
I mean no one, should tell you how you should get through it, what you should be saying, what you should be
doing or what you should be feeling. Don't be afraid to rely on your own judgment.
Not paying enough attention to taxes. I see this one all the time. People negotiate,
reach agreement, and get divorced without thinking through the tax impact of the concessions they're making.
It's not at all unusual for one of the spouses to get a nasty surprise several months — or years —
after the divorce, when they realize for the first time that they're facing a big tax bill they didn't know
about, such as capital gains on the sale of property. I see more of what I call "big dollar boners" in this
area than in any other, so I've given a lot of thought to what makes it happen that way. What happens is
that judges in most states don't pay much attention to tax, and so most lawyers don't pay much attention to
Trying to win back your spouse by being generous. This one makes me cry.
Here's the scenario: the spouse who is the left one isn't ready for the marriage to end and decides that he
or she can win back the leaver by "being nice." He or she lets the leaver have everything and agrees to far
less than fairness would dictate, fantasizing that the leaver will realize what a wonderful person he or she
is leaving and return to the marriage. I've haven't yet seen this work. What tends to happen instead is that
the leaver holds the left in contempt, takes what is offered and leaves. The left realizes his or her folly
only much later when it's too late to reverse it. The knowledge that he or she has been taken advantage of
makes the left one resent the leaver and the system, and further delays the left one’s recovery from
divorce. Yes, you read that right. It makes a bad situation worse, not just financially but emotionally as
Community Property Division
In community property states,
each spouse is entitled to one-half of all the property acquired during the marriage.
property of each spouse isn’t included in property division in community property states. “Separate
property” typically includes:
Property or businesses owned prior to marriage or living
Gifts and inheritances from family that haven’t been “commingled”
with community assets (such as in a joint bank account)
Pension proceeds of either spouse
that vested prior to marriage
Community property states include Arizona, California,
Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
In all other states, courts will divide a couple’s assets in
an “equitable” (fair) manner. “Equitable” doesn’t necessarily
mean “equal,” but what’s fair to both spouses.
In deciding what’s “
equitable”, a court will commonly take into account:
The length of the
The work history and job prospects of each spouse
physical and mental health of each spouse
The source of particular assets
Expenses of the children
Taking A Property Inventory
important to give your lawyer a complete list of all property belonging to both you and your spouse.
It’s vital not to hide assets, as anything left out of the property settlement will have to be
dealt with later.
Many lawyers have property checklists designed to jog your memory regarding
property you may have forgotten about.
Assets which people sometimes forget to list
When you and your spouse can’t agree on the value of a particular piece
of property, it may be necessary to have a professional appraiser- such a real estate broker- put a v
alue on the property for you. You’ll want to provide your lawyer with any information you have
regarding the value of property, including prior appraisals and assessments from tax collectors and so
Many divorcing couples make the mistake of fixating on one piece of personal property, such
as an art object or something else of sentimental value, and spending many times the value of the object
in arguing over who will own it. It’s almost always better to compromise between the two of you as
to how to divide your personal household possessions, unless your lawyer finds some reason to get
You’ll want to consult with a tax lawyer or
certified public accountant regarding any possible tax consequences of holding, transferring or selling
property as part of the divorce process.
Property Settlement Agreements
and your spouse can agree on how to divide your assets, whether it follows your state’s guidelines
or not, your lawyers will write up a formal agreement called a “property settlement agreement”
or “separation agreement.” Detailed lists of who gets what will be included in this agreement.
property settlement agreement carefully, and ask your lawyer about anything you don’t understand.
Once you’ve signed the agreement and it’s been approved by the court, it will be difficult
and expensive to change.
Following Through After the Divorce
As soon as the
property settlement is approved or the court finalizes the divorce, you’ll want to take care of the
details of property transfer:
Get your ex-spouse’s signature on any deeds, stock
transfers or bank account forms that will be necessary to transfer property into your name
any payments necessary to fulfill your end of the property division arrangement
Start the process of refinancing property if that is a part of your agreement
sure you release your name on the title to any property your ex-spouse is receiving
While it may be
the last thing you want to do, taking care of these details will save future trouble and make it easier to gain closure
on this chapter of your life.
When you’re divorcing, you’ll need to divide up your debts according
to your state’s divorce laws and the advice of your lawyer.
Factors to Consider
you ultimately divide your debts will depend on how you answer the following
Who will keep what pieces of property? It’s easiest for each spouse to take
debts for items of property each is taking.
How will you be dividing liquid assets like bank
accounts and stocks? If you’re getting more of these assets, you may end up with more of the
Will one spouse take the tax refund for the year, or will you divide it? Tax refund
money can go to paying off joint debts.
Will you be selling assets, such as vehicles and the
family home, to pay debts?
Will one spouse be paying alimony to the other spouse?
Does one spouse make a much higher income than the other spouse?
Will increases in rent or insurance
premiums make it impossible for you to take on certain debts?
Paying Special Attention to
With joint accounts, both you and your spouse are each individually responsible for
any balance. No matter what the court order says, you’re both ultimately responsible to the creditor for the
bill getting paid (even though the court ordered your spouse to pay).
If you maintain joint credit accounts,
you’ll want to make regular payments throughout the divorce process, so your credit rating won’t
It’s a good idea to close all joint accounts or individual accounts on which your spouse was an
authorized user. Your creditor may be willing to convert joint accounts into individual accounts of the spouse who will
be taking responsibility for that particular debt.
The creditor may require you to reapply and requalify for credit
when converting a joint account into an individual account.
Protect yourself from getting stuck with the
debts your soon-to-be-ex is supposed to pay by insisting on a “hold harmless” clause in your divorce
agreement. Your spouse
takes responsibility for any damage done to you or to your credit rating if your spouse doesn’t pay off
the debts as agreed between the two of you in your divorce agreement.
All home mortgage lenders will require refinancing before removing either spouse’s name from the mortgage. The
mortgage lender will look solely at the financial situation and debt-to-income ratios of the remortgaging spouse
in determining eligibility for a new mortgage.
If your spouse is taking the family home, and taking on
for the mortgage, insist on a clause requiring him or her to refinance the mortgage to relieve you of responsibility
for future payments.
You’ll also want to get a “hold harmless” clause in your divorce paperwork
that makes your spouse responsibility for any damage done to you or to your credit rating if your spouse doesn’t
pay the mortgage as agreed between the two of you in your divorce agreement.
If your soon-to-be-ex-spouse is contemplating bankruptcy, it’s important to
consult with a bankruptcy lawyer to protect yourself. You don’t want to be stuck with all the debt as a
result of your ex-spouse filing bankruptcy as soon as the divorce is finalized.
Generally,a person filing
for bankruptcy will still be responsible to pay:
Whether a person will have to
live up to property and debt settlements made in divorce proceedings depends on whether he or she will be able to
continue paying the debts and still be able to take care of himself or herself, dependents and business obligations.
The bankruptcy court will balance the harm done to the person bankrupting against the benefit to creditors and former
spouses of the person continuing to pay the debts.
You only have the obligation to pay spousal support
(“alimony”) when you are actually married. While a number of court decisions have allowed claims for
support between unmarried people who have lived together (“cohabitants”), these claims are different
from the claim for alimony.
An alimony award is generally paid in “periodic” (regular)
installments, usually monthly.
<-- Return to News, Articles and Resources