Divorce: A Guide to Handling Real Estate Assets

Divorce is a challenging and emotionally charged process, often involving significant financial and legal complexities. One of the most substantial assets that couples need to address during divorce is real estate. Whether it's the family home, vacation properties, or real estate investments, the equitable distribution of these assets requires careful consideration. In this article, we will explore some crucial factors to keep in mind when dealing with real estate assets during a divorce.

Determine the Ownership Structure

Before delving into the division of real estate assets, it's essential to establish the ownership structure. There are typically two primary scenarios:

• Joint Ownership: If both spouses hold the property title jointly, you'll need to decide whether to sell the property and divide the proceeds or have one spouse buy out the other's share.
• Sole Ownership: If one spouse solely owns the property, it may still be considered marital property, depending on state laws. In such cases, the non-owning spouse may be entitled to a portion of the property's value.

Property Valuation

Determining the fair market value of real estate assets is a crucial step in the divorce process. You can hire a real estate appraiser to assess the value of the property. It's essential to ensure that the appraisal is fair and unbiased, as disagreements about property values can lead to disputes.

Consider the Tax Implications

The sale or transfer of real estate assets during a divorce can have significant tax implications. Capital gains tax, property transfer tax, and other taxes may apply, depending on your jurisdiction and the specific circumstances of the property transfer. Consult with a tax professional to understand the tax consequences and plan accordingly.

Decide on Asset Distribution

Once you have determined the value of the real estate assets, you need to decide how to divide them. Several options are available:

• Sale of the Property: Selling the property and dividing the proceeds is often the most straightforward way to distribute real estate assets. Ensure you agree on the listing price, sales process, and distribution of sale proceeds.
• Buyout: If one spouse wishes to keep the property, they can buy out the other spouse's share. This may involve refinancing the mortgage to remove the other spouse's name from the loan.
• Co-ownership: In some cases, divorcing couples may choose to continue owning the property jointly, especially if it serves as a home for their children. This arrangement requires a clear agreement on responsibilities and expenses.
• Deferred Sale: In situations where selling the property immediately is not practical, couples may agree to a deferred sale. This means the property will be sold at a later date, such as when the youngest child reaches a certain age.

Update Ownership Records

After determining how to handle real estate assets, it's crucial to update ownership records. This involves filing the necessary legal documents to transfer ownership and update the property title and mortgage details. Failure to do so can lead to complications and potential financial liabilities.

Seek Legal Counsel

Divorce involving real estate assets is a complex legal matter that requires professional guidance. It's highly advisable to consult with an experienced family law attorney who specializes in divorce cases involving real estate. They can help you understand your rights, navigate the legal process, and ensure your interests are protected.

Divorce is a challenging process, and dealing with real estate assets can make it even more complicated. To ensure a fair and smooth distribution of real estate assets, it's essential to determine ownership, assess property values accurately, consider tax implications, decide on asset distribution, update ownership records, and seek legal counsel. By addressing these factors with care and diligence, you can make the divorce process more manageable and secure your financial future.

About the Author - Chris Abla

In 1992 Chris began a career in wealth management and financial planning following his studies in finance and economics at OHIO University.? He specialized his advisory practice working with business owners, entrepreneurs, professionals and high net worth clients.? Chris is experienced in asset valuation, risk management, tax and estate planning.? During 2020 he directed focus toward real estate as it has always been a favored asset class within his clients’ portfolios.? Today Chris brings his years of experience and wisdom to advise and direct his clientele in the purchase of residential and investment real estate as well as the specialized council required when managing a family through a divorce or probate.

If you are seeking the advice of an experienced fiduciary advisor contact Chris to arrange a personal consultation.