Mediation Blog » Your Responsibilities

Executing the Mortgage in Favor of Your Spouse

admin — Tue, 29 Sep 2009 12:00:35 +0000

If you are not in a position to refinance the house or pay your spouse immediately, and there are not enough assets to offset your spouse’s interest in the home, you might consider giving your spouse a mortgage on the home, or securing your spouse’s interest in the home using an equitable interest notice.

If you have determined what the spouse will be paid for his or her interest in the home, and the terms of the agreement, your lawyer can prepare a mortgage document to secure the spouse’s interest in the home in the land records. That way, even if you die, your spouse’s interest is protected.

A negotiating point will be whether or not the mortgage secured against the home will bear interest. Sometimes, it makes financial sense to pay your spouse interest on the mortgage which can accumulate if he or she has to wait a long period of time for the money rather than having to immediately sell or refinance the house. Understand, however, that even if the house value falls, you will still owe the amount of money set forth in the mortgage.

For example, let’s say your home is worth $100,000.00 and there is an $80,000.00 mortgage on the home, leaving $20,000.00 in equity. You and your spouse have agreed to divide your assets 50/50 and you are going to keep the house, but you are unable to pay your spouse for his or her $10,000.00 interest in the home. You agree to execute a mortgage in favor of your spouse that you will pay in a lump sum in 10 years. This mortgage will be documented by your attorney, who will draft the proper papers, and record them on the land records.

The next question is whether this mortgage will bear interest for your spouse. Your spouse is waiting ten years to get $10,000.00. If she or he forced you to sell the house, he or she would get money immediately. Having to wait for the money may mean that your spouse is not able to buy another house or condominium immediately and has to make certain sacrifices. In such situations, having the mortgage pay interest is a desirable option.

If the market goes up, and in 10 years the $100,000 house is now worth $200,000, you are still obligated only to pay the $10,000 (plus interest, if negotiated) agreed upon in the original divorce agreement. Your spouse then gets $10,000 (plus interest, if negotiated) and you keep the $190,000 value (less any outstanding mortgages) of the house. If the value of the house skyrockets to $300,000.00, you would get to keep all of the extra equity by virtue of the house’s appreciation, and you would only owe your spouse $10,000.00. For more information on the financial aspects of divorce, see http://www.peace-talks.com/finformation.php. Also visit the Peace Talks resource center at

http://www.peace-talks.com/resources.php.

Excerpted from Your Divorce Advisor: A Lawyer and a Psychologist Guide You Through the Legal and Emotional Landscape of Divorce (Simon & Schuster/Fireside 2001). For more information: http://www.yourdivorceadvisor.com/.

For more information contact Peace Talks www.peace-talks.com

Arrangements for the Sale of Your Home

admin — Tue, 22 Sep 2009 12:00:02 +0000

If you intend to sell your house, contact a neutral real estate agent who can give you trustworthy advice about preparing the property for a quick sale. Ask the realtor to tell you the minimum number of repairs and maintenance items needed to make the house easier to sell. Keep track of your expenses for the fix up, and keep track of who does all of the work. Don’t do anything fancy or major to the house unless it is absolutely necessary, or unless you and your spouse unequivocally agree that the improvement will be financially worthwhile. For example, painting the hallway is inexpensive and easy to do on your own, and if it will help your house sell faster, do it. If you and your spouse can cooperate in this effort, then do it together. If you can’t cooperate in doing this together, see if you can arrange to divide the tasks so that each of you can work on the house separately.

Even if your spouse won’t participate, such tasks still need to be accomplished. Perhaps you and your spouse can agree on hiring a painting company or maintenance service person to do the work for you, and splitting the cost. Even if you have to do all of the work yourself, do it. A speedy sale for a higher price benefits both of you. It is silly to let a home deteriorate, or let a sale slip through your hands by refusing to fix a roof, because your spouse won’t help pay. Keep a list of everything you do, so that if your case needs to be tried you can tell the judge about it later, but try to remain practical and pragmatic for now. Continue to work towards a solution rather than create an impasse, irrespective of your spouse’s behavior. Don’t lose sight of the benefit you will bring to yourself by putting up with some inconvenience in the short term. For some information on how to sell your house quickly, see http://www.ourfamilyplace.com/homeseller/prepare.html. Also see, “How to Sell Your House Quickly in Any Market, http://ezinearticles.com/?How-to-Sell-Your-House-Quickly-in-Any-Market!&id=1750273.

For more information contact Peace Talks www.peace-talks.com

Negotiations Once the Value of the House is Set

admin — Fri, 18 Sep 2009 12:00:27 +0000

Negotiating once the value of the house is set is a process that demands creativity and flexibility. Determine your priorities in advance of the negotiating process. In settling your case, you and your spouse can develop a plan that works for both of you. Generally, judges will approve any agreement which is basically fair to both parties. That means that you can be as creative as you wish with respect to the timing and provisions for the sale of the house and division of the equity.

Reasons To Sell

cannot afford mortgage payments
too much upkeep
too much money tied up in equity
too many memories
money owed to others (such as family loan for down payment) makes refinance or buy out impossible

Reasons Not To Sell

stability for yourself and children
ability to refinance or buy out spouse
sufficient diversity of assets, i.e., in addition to house equity you also have kept some liquid assets for emergencies and/or sufficient retirement funds given your age and employment
ability to maintain house
ability to make mortgage payments
tax considerations (deductibility of mortgage payments and capital gains)

If You Decide Not to Sell: Joint Versus Sole Ownership

You and your spouse have two choices concerning the ownership of the house. You can continue to own the home jointly, or one of you can own it in one sole name. Although joint ownership may continue after a divorce, in practice this is sometimes inconvenient. It keeps one spouse from mortgaging or selling the property without the other spouse knowing, but it also can create friction between divorced spouses who may have different priorities with respect to the upkeep and maintenance of the home.

If one spouse retains ownership, that spouse is entitled to make all decisions concerning the property, free from any interference from the other spouse. While this may not seem like a benefit initially, five, ten or fifteen years later the benefit of having autonomy with respect to the home ownership becomes more tangible.

Ownership of the house is different, or can be different, than the responsibility for paying the mortgage. If both you and your spouse have signed the bank papers to be responsible for the mortgage, merely signing the title of the house over to one spouse does not relieve the other spouse of his or her responsibility to continue paying the mortgage. Refinancing the home mortgage in the sole name of the spouse keeping the house is the safest way to protect the spouse who won’t be occupying the home. If refinancing is impossible or impractical, your lawyer can help you build language into the agreement to protect the spouse who has relinquished his or her interest in the house from having to pay the mortgage. For some excellent resources on dividing the marital home in divorce, see http://www.womansdivorce.com/marital-home-and-divorce.html. Also see the Peace Talks resource center at http://www.peace-talks.com/resources.php.

For more information contact Peace Talks www.peace-talks.com

Dissipating Assets

admin — Tue, 08 Sep 2009 12:00:29 +0000

With respect to stocks, bonds, mutual funds and other related cash assets, refrain from spending until after the divorce. If you suspect that your spouse may dissipate assets, write a letter to your broker, bank or financial institution immediately informing them of your impending divorce, and that you will not authorize withdrawals on any accounts without both signatures verified against the original signature cards at the institution. Once you’ve initiated the divorce, seek a court order freezing the assets in all of your accounts except for day-to-day living expenses. In some states, like Connecticut, these orders are automatic upon the filing of the divorce.

You are under the court’s microscope with respect to dissipating assets. If you need to use any of your savings to pay bills, make sure there is not a court order already in place prohibiting you from doing so. If there is, and you need to use some of the frozen monies, you must first obtain the Court’s permission. If you are permitted to use your assets to pay ordinary and necessary living expenses, keep records of how the money was spent, as well as a record of why the living expenses were ordinary and necessary. If the judge perceives you as dissipating assets, you may have a real problem at subsequent court proceedings or a trial. For a good article on dissipation of assets, see http://www.divorcedex.com/divorce/Dissipation-of-Assets-321.shtml.

Don’t plan on being tricky by closing accounts and then diverting the money to an untraceable account. All a judge needs to see is a bank statement with, say, $5000 two days before you filed divorce papers, and then a $5000 withdrawal two months after, with no disclosure concerning the whereabouts of the money, to determine that you’re a money-hider. If a judge believes you’ve hidden even a small amount of money, the next question will be “how credible are the rest of this person’s representations?”

Because you are under a microscope during your divorce, keeping a paper trail of how you spend your money is important. Keep a notebook in which you record all major financial transactions, including receipt or payment of child support, medical bills for the children, any savings that you utilize or any accounts that you cash out, bank statements, credit card statements, and so forth. You aren’t necessarily going to need these records, but if you do need them, you aren’t going to want to have to dig around the bottom of a shoe box or call MasterCard in order to find them. You can always throw the paper trail away later if you do not need it. Another terrific article on dissipated marital assets appears at http://www.womansdivorce.com/dissipated-marital-assets.html.

For more information contact Peace Talks www.peace-talks.com

Community Property States

admin — Fri, 21 Aug 2009 12:00:50 +0000

The remaining nine states are Community Property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. This means that, with a few exceptions, only property which was accumulated during the marriage will be divided, and that property will be divided 50/50, asset by asset, whenever possible. Wages, income and bonuses are community property, as is credit obtained during the marriage. Therefore, homemakers are not penalized by not working outside the home, and claims of “I earned all of the money, so all of the property is mine!” aren’t considered by the court. Property which accumulated to either of you prior to the marriage, or during the marriage through a gift or inheritance, or by virtue of appreciation or rents from other pre-marital property is considered “separate property” and is not subject to division by the court (again, with some exceptions).

In Community Property states, the main exceptions are:

when one spouse receives a community property-funded education, the community property used to fund that education will be reimbursed for the educational expenses, unless both spouses received a community property funded-education, more than 10 years has passed since the education was completed, or the marital community has benefitted in some other way. Any educational loans taken out for educational expenses are the responsibility of the person who received the education.
when liabilities exceed assets.
when one spouse has misappropriated family assets. Oddly enough, this does not include excessive gambling debts, as all debts incurred during the marriage are considered marital debts, irrespective of whether one spouse had the permission of the other spouse to incur the debt.
lawsuit liabilities for injuries. For lawsuit liabilities, who has to pay depends on whether the accident happened in the course of “marital business”. For example, if you are involved in an accident while driving to the store to buy groceries, then the liability is paid from community assets. If you get in an accident while on your way to meet a friend for a social outing, the liability is paid from your separate property.

For people with children and a family home, the family home may be awarded to the custodial spouse, and the other spouse may receive other assets to compensate for giving up an interest in the home.

Businesses started prior to the marriage present a special problem. The division depends upon whether any increase in the business value is due to the nature of the business, or the businessperson’s special efforts. If the business has increased in value because of the nature of the business, then the business is generally separate property. The leading case in this area of law is VanCamp, pertaining to the divorce of the VanCamps of pork & beans fame. Their business value increased drastically during World War II just because of the nature of the business, i.e., canned food during wartime. Such a business was maintained as separate property.

For a host of free divorce information, see http://www.peace-talks.com/resources.php. A list of other resources is available at http://www.peace-talks.com/divorceinformation.php.

For more information contact Peace Talks www.peace-talks.com