Some helpful hints to avoid financial disaster during a DIVORCE

Are you upset and thinking about a divorce?  DON’T RUSH INTO IT UNLESS YOUR SAFETY, HEALTH, OR EMOTIONAL WELL BEING IS AT STAKE.  There is a lot to be said about the benefits of familiarity, devotion and plain old (long endearing) love.  But if you decide to proceed, here are some helpful hints to avoid some of the financial disasters that I have seen over the years when assisting divorced clients in buying or selling their homes: 

1.  Each spouse should have his or her own attorney and Realtor - Your house should always be treated as a financial asset not just a home you reside in.  It is also one of the biggest financial investments you will ever have with “long term” financial and emotional consequences. It will affect your net worth, credit rating, retirement, taxes and stability.  Yes, your home and the result of the divorce can cripple you for a long time to come if you don’t handle it with care and understanding. 

2. Both spouses’ names should be on the Deed - I have seen and heard horror stories that have resulted from trusting spouses who originally agreed to place their financial asset in only one name.  Unfortunately, over time the relationship deteriorated and the trusting spouse forgot that his or her name was not included on the Deed only to find that depending on the circumstances, his or her half of the home may be lost forever.

3.  Home Equity Loans or other second position home loans - If the home is transferred to one spouse as a result of a distribution of assets and the current first and second mortgages continue to exist; the payment of those mortgages should be the responsibility of the home owner.  If the second mortgage becomes the financial responsibility of an ex- spouse, the owning spouse may be locked into the first mortgage position and the ownership of the residence until the ex-spouse pays off the second mortgage.   Like all homeowners, the first and second mortgage must be paid off when transferring (refinancing or selling) the asset .  Further, the two loans will continue to be reported on both spouse’s credit reports (this may impact credit ratings and buying qualifications). 

4.  Open Credit Lines - There have been numerous cases where the divorced couple, when listing debt, has forgotten about credit lines (home equity or credit cards) that were opened and paid off.  If the equity line is not cancelled, after the final divorce decree, the homeowner’s ex-spouse could access that credit line and the homeowner may end up having to pay off the second and sue the former spouse for the equity used. 

I am a real estate broker passing on information to you so you can avoid some of the financial disasters that I have seen over the years. For additional information, please consult an attorney familiar with your specific circumstances and the laws applicable in your state.