{"id":12394,"date":"2019-09-30T16:36:46","date_gmt":"2019-09-30T23:36:46","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=12394"},"modified":"2024-05-30T09:31:57","modified_gmt":"2024-05-30T16:31:57","slug":"divorce-asset-protection-strategies","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/divorce-asset-protection-strategies\/","title":{"rendered":"Keep Your Home with These 3 Divorce Asset Protection Strategies"},"content":{"rendered":"

The pool was green. The septic system was all backed up,\u201d said David Dorman<\/a>, a real estate agent in that area with 20 years of experience. What\u2019s more, the ex-wife thought to be living there had moved out and wouldn\u2019t cooperate with showings. \u201cIt got so bad that [the ex-husband] had to petition the court to give him sole custody of the property to maintain it.\u201d<\/p>\n

So much of our lives and our emotions are wrapped up in our homes that when divorce enters the picture, homeowners can damage one of their biggest assets while fighting over who should have done what\u2014or, as in this case, trying to get back at the other.<\/p>\n

While there are several divorce asset protection strategies, such as having a prenup, there\u2019s actually another that\u2019s relatively less costly in the short term: keeping the marital home in good standing so that both exes can reap its maximum value upon a sale<\/a>.<\/p>\n

A house is one of the biggest assets that a married couple has\u2014and can provide a significant amount of money to each spouse once it\u2019s sold in a divorce. Research shows that Americans on average have $150,506 of wealth tied up in their homes<\/a>. (If you own your house free and clear with no outstanding debt, bump that average wealth nationwide to $229, 296<\/a>.)<\/p>\n

However, many people don\u2019t see that big picture amid the acrimony. \u201cI sell a couple of hundred homes a year that are foreclosed properties for banks and government, and a huge chunk of those are as a result of a divorce,\u201d said Tim Ray<\/a>, a top agent in Kansas City, Missouri<\/a> who regularly helps divorcing couples sell their home<\/a>. \u201cPeople just throw their hands up because they don\u2019t know how to deal with their situation.\u201d<\/p>\n

Here\u2019s another way to protect your house in a divorce\u2014or rather, its overall value.<\/p>\n

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Source: (rupixen\/ Unsplash)<\/figcaption><\/figure>\n

Keep up with the mortgage payments<\/h2>\n

Lenders say that divorce is one of the top five personal scenarios\u2014life events beyond negative equity and rising interest rates\u2014that can lead to foreclosure<\/a>. Commonly referred to as \u201cthe five D\u2019s,\u201d they also include a death in the family, drugs or alcohol dependence, disease leading to unexpected medical bills, and the denial of a lifestyle that can\u2019t keep up with mortgage payments.<\/p>\n

Yet even if a divorced couple avoids foreclosure, they may get less out of a home sale than they\u2019d like. Shawn Leamon<\/a>, a certified divorce financial analyst in Dallas, Texas, who hosts the popular podcast \u201cDivorce and Your Money<\/a>,\u201d said he\u2019s seen several short sales<\/a> where lenders agree to let divorced couples sell their homes for less than they owe on the mortgage in lieu of foreclosure<\/a> because of ignored payments or maintenance.<\/p>\n

An ex who wants to keep the property likely will refinance to qualify for a mortgage with his or her sole income<\/a> and buy out the spouse\u2019s share of equity. However, sometimes a couple wants to sell the house outright, resulting in either \u201cimpaired communication<\/a>\u201d over who should pay the mortgage, emotional and financial stress related to this, or one party ignoring the payments out of spite.<\/p>\n

That was part of the issue with the scenario that Dorman recalled above. \u201cShe wasn\u2019t paying the mortgage,\u201d he said. \u201cHe\u2019s the one that\u2019s still on the deed, on the [promissory] note. So he had to step in and petition the court to give him some control over the property so that he could keep it from going into disarray.\u201d<\/p>\n

The ex-husband has taken the home off the market. \u201cHe\u2019s fixing it up, and hopefully, we\u2019re going to have it back in several months when he can fix all the finances with it too,\u201d Dorman said.<\/p>\n

A divorce agreement doesn\u2019t legally change the terms of your original mortgage, according to Lynnette Khalfani-Cox, personal finance expert at AskTheMoneyCoach.com<\/a> and author of Zero Debt: The Ultimate Guide to Financial Freedom<\/i><\/a>. <\/i>If both people co-signed for the house, credit cards, a car loan, or any other debt, creditors can legally pursue either for repayment.<\/p>\n

Selling the home is the best way to protect the credit rating of both parties because your joint obligation is satisfied, Khalfani-Cox notes. Until then, so that you\u2019re not just crossing your fingers that your ex pays the mortgage as agreed, she suggests talking with your divorce attorney to include in your divorce agreement a Property Settlement Agreement<\/a> (PSA), which addresses several aspects related to the house. For instance:<\/p>\n