Depending on the circumstances of your case it may be advantageous for you and your spouse to not do anything at the moment your divorce is finalized. This generally goes against a piece of advice that I frequently give out- that is, to have everything set in stone the moment your divorce is over with- but hear me out as to why this may be an exception to the rule that you seriously need to consider.
The most important part of selling a house is what the sales price on the home ends up being. Everything else is just details if you can sell the house for a fair price. All of the arguing with your spouse over the little things and the stress of having the house on the market will fade away once you have an offer that is acceptable.
If you can’t get an offer that is acceptable and the main reason is that the housing market in your area is subpar, it may be wise to hold off on selling the house. There is no use pushing to sell an asset as valuable as your home when the time is not right. As long as you or your spouse are able to make the mortgage payment each month then you can always hang onto the house and put it on the market for sale when the market for houses improves.
Or, you may find yourself in a situation where you don’t have all that much equity built up in the house yet at the time your divorce comes to an end. For instance, if you and your spouse just purchased the house a year or two ago it is unlikely that you have a huge chunk of money invested in the home beyond the down payment. What should you do if you haven’t been in the house long enough to make it worth your while to sell?
In that case you may want to remain in the house a little longer. If you expect to come into a large sum of money in the near future such as if you are about to be paid a bonus from work or an inheritance from a deceased family member then you can hang onto the house until you get your hands on the money.
Consider renting the house out in the meantime
If you have ever wanted an opportunity to own investment real estate, now would be a good time practice the skills you will need to develop in order to be success in that field. You and your spouse can decide if renting the house out while you are waiting to sell it is a good idea. This can be complicated for a couple of different reasons, however.
First of all, it is another issue that can potential cause disagreement between you and your spouse during the divorce. If you are not able to decide on the terms to be used when leasing the house you will need to spend extra time deciding how to put the terms of leasing the home in your final decree of divorce. Another consideration is that both of you may not be able to afford to rent your own homes while waiting for the home to sell. Your cash situation may improve once the house is sold but for now you are relatively poor in pocket.
No matter what option you choose in relation to your home, there are risks associated with this kind of behavior. The housing market could be on fire right now, but two weeks after your divorce that all could change due to a split second.
Do not underestimate the importance of your family home
While your home is an important investment for you and your spouse, you should not feel pressured to do a certain thing just because someone tells you it is a smart idea. It is incumbent upon you to investigate each option and determine what is best for you and your family, all things considered. Do your best to remain as objective as you can and problem solve throughout the process of selling your home.
How to keep your life organized during the divorce
No matter your specific circumstances, your divorce will require that you have financial documents available. The health of your financial life will be a huge part of your case. The state of your financial life can probably be found in financial documents that are either online, at your home or at your office.
It can be a nerve wracking experience to not know anything about your family’s finances and suddenly be held responsible for making decisions regarding what to do next in relation to your family home, your investments and other aspects of your financial lives. Investment documents should be kept together, retirement plan information, as well as taxes should all be kept in the same area.
The great thing about making an effort to be organized is that it takes relatively little effort to do so and can pay huge dividends for your case. If nothing else, your peace of mind should increase, knowing that your financial documents are already organized.
Taxes: everybody pays them, start to collect the returns
Tax returns for you and your spouse (if filing separate from each other) should be located immediately. Go back as far as you can, but no more than five years. Any updates to your taxes as well as correspondence from the IRS should be included as well. Remember, if you and your spouse owe the IRS any money that should be taken care of now rather than having to wait until after your case to discover an outstanding tax liability.
Money from work and other sources needs to be included in the organization process
Next, go back and start to collect your paystubs from work. If you are paid via direct deposit to your checking account you should be able to go online and collect digital copies of each paycheck either from your work’s HR page or from another source. Ask the person at your work who handles paychecks what is available to you. It is unlikely that you are the first person to have ever asked this question so he or she should be ready with a response.
If you receive income from a source other than your employer, you will need to collect proof of that income as well. The ability to pay child support, spousal support or to take on certain bills during the course of your divorce will be determined in large part based on your income. If you have a rental property you should collect the lease agreement with your renter. Pension statements (if you are retired) and any insurance or disability payments made to you should be collected and organized as soon as you possibly can.
Insurance policies- often forgotten but still very important
Families that are doing well financially know that it is just as important to pay solid defense as it is to play offense. Meaning: what you do to protect the things that make you money are very important. Insurance is one of those things that can help you protect the things that actually make you money.
What you pay in health insurance on a monthly basis should be spelled out for you and your spouse. The type of policy you have (including co-pays, deductibles and other dollar figures that are associated with it) should be spelled out as well for everyone to know. On top of health insurance, you need to collect your life insurance policies, disability insurance (long and short term) and vehicle/home/umbrella insurance policies as well. It could be that you bundle many of these insurances together so organizing will hopefully be made a little easier as a result of this.
Retirement plans factor into a divorce even if you are far from retirement age
Why do even young people have to concern themselves with retirement accounts in their divorce? Because even as a young person you need to be concerned with your retirement. If your 401(k) has a relatively small amount of money in the account now, that can grow dramatically between the time of your divorce and your retirement. As such, you will want to make sure that this account is cared for and you are not needlessly sending part of it to your spouse in the divorce unless you have to.
Won’t someone please think about the children?
Depending on the age of your kids, they may have financial accounts that need to be detailed within the context of your final decree of divorce. For example, your child may have a 529 account, pre-paid college account or another type of college savings plan. To make sure that this account is cared for after the divorce you need to remove any doubt as to which parent will have those accounts in their name. The location of the accounts, current value and the type of investments that are involved with the account need to be made known at the time of your divorce.
Cash is important to keep track of- here is why
Cash is king! In an age where some of us seem to think that fancy investments and purchasing things on credit is all the rage, in actuality cash is more important now than it ever has been. So many of our neighbors can’t come up with a few thousand dollars to pay for small emergencies that it is always useful to have some money laying around just in case of an emergency.
However, do not let that cash lay around without first accounting for it. Allow me to tell you why. I became aware recently of a man who was going through a divorce in Montgomery County who worked outside of the state for much of the year. He and his wife owned a nice home right outside Conroe. Inside the home this gentleman kept a safe with nearly fifty thousand dollars of cash inside. He kept this money for emergencies. Since his income was not consistent, it was always nice to have this cash around in case he needed to pay bills with it.
Here is where the trouble arose. This man never actually counted the money or did anything to keep track of it. During his divorce he never even made his attorney aware of it until one day when he was home from work he went into his safe to find that the money was not there. He asked his wife if she knew about the money and she claimed to have no knowledge of it at all. He could tell that someone had been in his safe because the keypad had been changed in some way.
The way that I heard the story, this guy contacted a local locksmith to come to his house to take a look at the safe. It just so happened that he contacted the same locksmith that his wife had contacted to open the safe. The locksmith told him that he had just been to the house a few days earlier. However, because our client had no proof that there was ever any money in the safe it became very difficult for him to hold his wife accountable for the money that was taken.
At the end of the day, you need to photograph, document and keep accurate records of all your financial goings on. It can really come back to haunt you if you do not. In tomorrow’s blog post we will detail some tips you can use to get organized for your case and for your post-divorce life.