Your Home And Your Assets
Divorce and Your Home
What is Separate Property?
Separate property is:
- property owned prior to marriage
- property acquired at any time by gift or inheritance
- recoveries for personal injuries sustained by a spouse during marriage (except for loss of earnings)
- property that is a mutation of separate property
What is Community Property?
Community property consists of the property, other than separate property, acquired by either spouse during marriage. As a Dallas Divorce Attorney I am often asked questions about property that is titled in one spouse’s name. For example a house purchased during the marriage but only in Husband’s name. This property is presumed to be community property. The same is true for retirement benefits. Retirement benefits that have accrued during the marriage are community and subject to divisions by the Court.
Is my spouse entitled to assets I owned before the marriage?
No. If we can prove that you owned an asset prior to marriage that assets and its increased value is your separate property and cannot be awarded to your spouse. The burden of proving separate property is on the party claiming the separate property.
Am I guaranteed a 50% split of the community assets?
No. Community property is divided in a just and right manner. This does not necessarily mean equally; there are factors such as differences in earnings of the spouses, the nature of the property involved, and fault in the breakup that the Court can consider in the determination of “just and right.” However, as a general concept, property is divided equally.
We have been separated for 2 years, is my wife entitled to the money I have saved in my 401K since then?
Yes. The value of all the property is to be determined as near as possible to the date your divorce. The court can consider a long separation in awarding the assets; however, everything that is accumulating while you are still legally married is community property.
I think I want to stay in my home…what do I need to keep in mind?
First, take into consideration the size of the home, utilities, payments, family needs. Does staying in the home truly make sense? You will likely now be entirely responsible for the house payment, taxes, insurance, upkeep, maintenance and other related bills. Your household income may be decreasing, and your overall expenses may be increasing if you are subject to a court order for support, so it is important that you are aware and thorough in determining what your actual expenses will be in keeping and maintaining the home on your own.
My spouse is entitled to share in the equity we have in our home… how is this handled?
The equity in the home needs to be determined by an appraiser. The appraised value less the eventual costs of selling (commissions and seller closing costs) equals the equity to be split between the parties. This is the amount your will be obligated to give your ex-spouse. And in general any money you or your spouse contributed to the home from your own pre-marital assets must also be accounted for in determining the final decision of equity.
With the divorce, your spouse may put a marital lien on the property or there may be a court ordered mandate for distribution of the equity, possibly including interest on that amount. This means that you will likely have a specified amount of time to obtain the funds needed to give the ex-spouse their portion of the equity. This can be done by cashing out the equity in the home with a new mortgage, selling the home or by using other assets you have to “buy out” their stake in the home.
If you choose to stay in the home, you have two financing options to pay your ex-spouse. You can either refinance your home to get cash out, or you can obtain a new second mortgage or home equity loan. This is where you will want the advice of a trusted mortgage professional.
Even though you may now be qualifying for the loan without a spouse’s income – with your own good credit and income, you can usually qualify on your own. Often, child support and alimony is viewed as stable income, if it has been received for three months and is likely to continue for at least three years.
What if I am the one leaving the home?
It is important to know that even though the divorce decree awarded the home to your spouse, you are still obligated for this debt in the eyes of the mortgage company.
Many people assume that by filing a Quit Claim Deed removing themselves from the title, they are no longer responsible for the mortgage. A Quit Claim Deed only eliminates your name from the title of the property, but not from the mortgage loan. The benefit of a Quit Claim Deed is that if the spouse on the title passes away, the property will go to his or her heirs rather than to the ex-spouse.
How might this scenario impact my credit – and what can I do?
Unfortunately for many, divorce is a time of great financial hardship and credit challenges. Because you are obligated on the mortgage until it is paid in full or refinanced, it is imperative that the person responsible for the payment remains current. One possibility you have to remove your name from obligation is to contact the company which currently holds your mortgage, and ask to do a “Qualifying Name Delete Assumption.” This process will leave the existing loan in place, but would relieve the non-occupying spouse from their obligation on the loan.
If I want to go buy another home, will my name on the old mortgage cause a problem?
Although it is difficult and not usually advised to purchase another home until your divorce is final, we are happy to look over how you expect the financial situation to be finalized, and help you get ideas as to what you will qualify for.
In most situations, child support and alimony must have been received for three months, and be likely to continue for at least three years in order to use this income for qualifying.
Even if you are still listed as a co-borrower on the mortgage for the prior home, if the divorce decree states that you are not obligated for the mortgage, many mortgage programs will allow you to be qualified without this obligation. However, any late payment issues on the mortgage held by your ex-spouse will impact your credit scores, as the mortgage is still a joint liability in the eyes of the credit bureaus until you are removed via a refinance, sale or other method.
What if I do want to purchase another home before the divorce is final?
This may be possible, but be aware that your spouse may have a marital interest in your new property, and it will need to be handled by your attorney with a Quit Claim Deed being given from your ex-spouse to you. You will also have to qualify with the full debt from the current home, because there would not yet be a final divorce decree assigning ownership.
Be very careful with this situation since the financial situation you expected may not be the final result when the decree is entered.
What are temporary orders?
Whether your case involves custody, property or both, you will likely have temporary orders. Temporary Orders are just that, temporary. They set out a guideline for how bills will be paid, where the children will reside and who will remain in the house.
A good result in the temporary orders hearing or agreement is crucial, particularly in custody cases. Temporary orders are often a clue to the disposition at the final hearing.
It is very important to have the right attorney and be properly prepared for your temporary hearing.
An unfavorable result doesn’t mean your case is over. Often, I am hired after a party has received a bad result at a temporary hearing.
As a divorce attorney, I work with a client to develop a very specific plan designed to improve the final outcome of the case. I have seen many cases turn around through effective legal work and consistent effort by the client.