Have you started thinking about a divorce from your spouse? What sort of plan(s) do you have in mind as far as collecting information and figuring out what you want to see happen in regard to your children and your property? If you have not begun doing so, now is the time to plan for these issues. The fact is that you will not have an opportunity to think long and hard about every subject in the divorce while your case is going on. Too many things will be diverting your attention and you may not feel like you are able to devote sufficient time and energy to each issue.
In yesterday’s blog post from the Law Office of Bryan Fagan, we discussed important topics that I believe every person going through a divorce will need to include on their personal pre-divorce checklist. It goes without saying that every divorce case is unique. After all, you and your spouse are unique persons, your marriage is unique and therefore the nature of your divorce is unique. However, if you are going through a divorce the issues and the processes involved in the case are the same for you as they are for anyone else. With that said, planning is key to achieving goals within your divorce. If you do not plan sufficiently well you may find that the goals that had been reachable are no longer within grasp.
Issue related to the family home
Your home is likely your largest and most significant asset. This is true from a couple of different vantage points. From a practical and financial perspective, you have invested a great deal of money into your family home. It represents a down payment, principal and interest payments, homeowner’s insurance payments, taxes, upkeep, improvements and repairs. These are substantial amounts of money that you have invested into a piece of dirt with a dwelling built on top of it. You need to make sure that you have thought through the issues that we are about to discuss from a financial perspective,
By the same token, your family home is an emotional/relational asset as well. After all, even though a house is just another building with four walls it is also the place where you and your spouse have lived together. You may have even been fortunate enough to raise children in that home. Along with the time you have spent there, you would have accumulated memories based on shared experiences with your family. Even though you should do as much as you can to shy away from holding onto these memories while making decisions it would be impossible to divorce yourself from those memories.
While we are on the subject of discussing the family home, it is worth considering the nature of the property- whether or not it is part of your community estate. Since Texas is a community property state this is an extremely relevant question. If the house was purchased during the course of your marriage with community funds then your home is community property. This means that it is subject to being divided up in the divorce.
There are basically three outcomes that can occur in a divorce in relation to the family house: 1) the house is sold and the profits from the sale of the house will be split between you and your spouse 2) you will retain ownership of the home after the divorce or 3) your spouse will retain ownership of the home after the divorce.
Right off the bat, you need to figure out if you want to stay in the family home. Does it fit into your life goals for after the marriage? If you have children under the age of 18, does staying in the house provide a benefit to the kids? You may want to cling to the house for no other reason than you are emotionally attached to it. I understand that instinct, but the reality is that if you cannot afford the mortgage payments on your salary alone it would not be in your best interests to remain in the house- even if it means having to move for your children and yourself.
When community income is used to benefit the separate property of you or your spouse
Let’s suppose that the house belongs to your spouse as their separate property. He bought the house right out of college before you two ever got married. However, he lived in the house for only a couple years before you two got married and moved in. Since then, the mortgage payments have all been made with community income. You built an addition to the house which utilized community income. Basically for the past 10 years any and all payments to the mortgage or improvements were done with community income.
What you would be look at is a claim for reimbursement. Reimbursement refers to a situation where community property was utilized to benefit the separate property of you or your spouse. In the situation I just presented you with, community income would be used to benefit your spouse’s separate property. You should begin to calculate how much community income went towards the house in payments of any sorts. Those payments would need to be paid back to the community estate so that it could be divided in the divorce.
Because it is unlikely that your spouse has tens of thousands of dollars (if not more) laying around ready to put back into the community estate, it is more likely that he would simply elect to award you a piece of community property with an equal value to the reimbursement figure in order to make you whole. Community property bank accounts, stocks, other investments or a combination thereof could fit the bill nicely and make everyone square at the end of the divorce.
Deciding what sort of value is in the house at the time of your divorce
Thanks to the magic of American private enterprise, the real estate market in our area and the country as a whole is typically one where most everyone can see a return on investment when it comes to their home. You may not have seen skyrocketing increases in the value of your home but it is likely that you have seen some degree of uptick in its value since you have purchased the property. As such, figuring out how to get a handle on the value of the property is very important.
You can do a quick analysis of its value just by looking through the internet and seeing what similar homes have sold for in your area. Frankly, this is what an appraiser or real estate agent would do, as well: consider the sale price of comparable homes. There is nothing overly complicated about doing this. It’s not a scientific study so you may be off by a little bit but you can probably get a decent idea of the value of your home just by doing this,
If you plan to use the house as a bargaining chip to protect your retirement from being divided or other community property from having to be split up you may want to allow your spouse to keep the house (and the responsibility/liability associated with the mortgage) and you hang onto some other piece of community property. What you need to do is a get a rough outline on how much value is in the home before you can see how hard of a bargain to drive in these other areas.
Selling a house- what you can plan for and what you have to wait on
What you will find in planning for a divorce is that there is only so much you can decide on in advance of the divorce. This is both a blessing and a curse. It is a blessing because you should know that you will be turning your wheels if you spend too much time on the planning. Circumstances will change. People will spend hours and hours creating these complicated schemes and plans for what they want to see happen in their divorce. Ultimately, if your spouse doesn’t agree in large part with your planning then all your thoughts were for naught. So, don’t spend too much or too little time on a subject like how to treat your house in relation to the divorce.
The reason why I say it is a curse that you cannot and should not devote too much time to this subject is that, like I touched on earlier, now is the time that you will have the best opportunity to really sit back and consider your options. Once your divorce gets up and running your attention is going to be diverted into ten different directions at once. You may feel like you never had a chance to really map out your expectations for your life and your house post-divorce. It would be nice to be able to have the house issue squared away pre-divorce, but odds are you will not be able to wrap it up completely until towards the end of your case.
A word on your children and your home
If you are a parent, I would recommend paying close attention to this section. I know from my own experiences parenting as well as from the experiences I have shared with clients that we as parents place special importance on being able to raise our kids in a consistent, stable environment. As such, we can look to the family house as a life raft or a dock to moor our boats to in the storm of divorce.
This can be seen in our convincing yourself that the house means more to the kids than it actually does. I have seen this evidenced in many different ways but most notably in one particular divorce case I was working on a few years ago. A father that our office was representing in a divorce was bound and determined to be able to remain in the family home during and after the divorce. This was not a man who had a particular strong case. He was ceding primary custody of the kids to his wife. However, he believed in his heart of hearts that the kids would be better off being able to stay with him at the house they grew up in during the father’s periods of visitation.
What did this mean for our client? Well, it meant that he made very, very generous offers to his wife in the form of spousal support/maintenance in order to stay in the home. Two factors that helped in his pursuit to stay in the house were that his wife had already moved out with the kids and that she could not afford to pay the mortgage on her income alone. This, along with an outsized fear that the kids would fall apart emotionally if the house was sold after the divorce, led our client to make offers in mediation that were too much for the opposing party refuse. Every client has their sticking point and the house was this man’s. He got to remain in the home during and after the divorce but it ended up costing him thousands of dollars per month in spousal support/maintenance.
Retirement and miscellaneous planning items: tomorrow’s blog post subjects
Please join us again tomorrow as we share information related to planning for divorce from the perspective of retirement. After your home, your retirement accounts likely represent the largest portion of your net worth and community estate. If you would like some perspective on how to handle these issues, I recommend that you join us tomorrow.
In the meantime, if you have any questions about the material that I shared with you today please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week where we can answer your questions and address your concerns.