DIVORCE SETTLEMENT

Dividing Assets and Why You May Not Want to Keep the House

Dick Harsin, CDFA®

November 7, 2017

As you go through the divorce process, one of the toughest decisions you may face is figuring out what to do about you and your spouse’s home.

Thinking About Keeping Your Home After Divorce? When navigating through the divorce process, and dividing up the family assets, it is natural that you might want to remain in your home. Sometimes it’s hard to make the change and let the family house go, but it can end up being a very expensive mistake to keep it. If you and your spouse lived in the house for an extended period of time, there’s a good chance that there’s a large amount of equity attached to the house. It’s important to consider the upkeep and maintenance for your home that could require a significant increase in income to make ends meet. Taxes are another important factor to consider if you’re weighing the pros and cons of keeping your home.

It’s important to consider the upkeep and maintenance for your home that could require a significant increase in income to make ends meet.

It’s important to consider the upkeep and maintenance for your home that could require a significant increase in income to make ends meet.

Take Taxes and Liquidity Into Consideration

You will be subject to potentially higher capital gains taxes if your home has a large capital gain that exceeds $250,000. If you decide to sell the home before the finality of your divorce, you can jointly deduct up to $500,000 of capital gains as opposed to $250,000 if you’re unmarried. However, if you use liquid assets to buyout your spouse’s equity, then you could find yourself short on cash for living expenses. It’s extremely important to review your post-divorce budget.

Determining the Value of the Equity

The buyout for your home is based on its value at the time of divorce. A reputable appraisal professional with experience in divorce valuations should be responsible for the valuation. Finally, you should acquire an estimate of sales commissions and closing costs from a reliable local real estate business or escrow professional.

A Certified Divorce Financial Analyst® can help determine and evaluate the financial impacts of keeping your home.”

Buying Out Your Spouse’s Equity, a Viable Option?

In a divorce, you need to be able to buyout your spouse’s equity in order to keep the house. If the majority of your money is tied up in the equity of the home, then you may not be able to buyout your spouse’s share. In some cases, spouses will exchange retirement assets or most of their savings for the home equity, but both options have implications that should be taken seriously.

A Certified Divorce Financial Analyst® can help determine and evaluate the financial impacts of keeping your home. Weighing out the true pros and cons can help you make an informed decision and enjoy a successful post-divorce life and lifestyle.

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Second Saturday: A Divorce Planning Seminar

Frequently women, particularly dependent mothers, are those hit hardest by a divorce. Since 1988 the Women’s Institute for Financial Education (WIFE) has offered their Second Saturday divorce planning workshops to help women navigate the divorce process. Their motto, “A man is not a financial plan.”

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You should begin by surrounding yourself with the professionals who can guide you through the divorce process. Most divorce lawyers and CDFAs® will offer a reduced or flat rate for an initial consultation to better understand your situation and begin to recommend the next steps.

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Emerald City Divorce Solutions

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