Divorce is never something you plan on, and it’s far from a pleasant experience. But it does happen, and the divorce process is usually complicated and sometimes ugly, especially when it comes to real estate assets. Certainly, you should hope for and work toward the best and most amicable outcome, but you should also prepare for the worst – if, that is, you want to protect your assets. With that in mind, we offer these 3 tips for protecting your Colorado Springs real estate assets when going through a divorce.
1. Take the Necessary First Steps
Emotions run high during a divorce, but you need a clear head, so take the necessary steps that will allow you to proceed logically and rationally. Here, then, are some preparatory steps you should take early on to protect your Colorado Springs real estate assets in a divorce . . .
Prepare Before Filing
“You need to keep in mind that everything is divisible during a divorce settlement. Take measures before filing a divorce to protect what you can, and gather key evidence supporting any claims you intend to make in court.”
Inventory Non-Marital Assets
Take the time to compile a thorough list of all property you acquired before the marriage and gather all the supporting evidence and documentation. “This means collecting your real estate records before your spouse hands you the divorce.”
Get an Accurate Valuation of Your Real Estate Assets
“Most people tend to forget the implication of tax on investment, such as deferred tax payment on retirement accounts. An early withdrawal could also come with a penalty. Put such factors into consideration when appraising the value of property and investments.”
Choose Battles Wisely
The simple fact is that not everything is worth fighting for, especially when you consider the cost of attorneys. So be sure to weigh the value of the asset against the attorney cost before making a petition.
Consider Getting a Mediator
Divorces are expensive, and outcomes aren’t always what you desire. Consider using a mediator because this will be far less costly than attorney fees, and a mediator can help facilitate the divorce agreement.
2. Implement These Tactics
There are three major things you can do to protect your real estate assets when going through a divorce. They are . . .
Use Equity to Your Advantage
One effective way to protect your Colorado Springs real estate assets is by maintaining negative equity.
“You can protect the real estate assets you have control over and have purchased individually by maximizing on its equity. Equity often determines the real value of a property. By subtracting any loans secured with the property from the property’s market value, divorce attorneys are able to determine the amount that should be split between the divorcing parties. Maintaining negative equity is the best bet at protecting your assets.”
Prove Assets Are Premarital
Assets in a marriage are considered part of the marital estate unless you can prove that they are non-marital assets. “For real estate acquired before the marriage, you need to prove that any loans associated with the asset were cleared before you got into the marriage.” If you don’t do this, the court could that “the asset has only partial non-marital value.”
Consider Setting up a Land Trust
Any real estate assets you acquired before the marriage can be put into a land trust. This will protect the assets from creditors and litigators, and it “can protect you from losing your property during divorce.”
Here’s how it works . . .
“A land trust offers protection by maintaining your privacy with regards to ownership of real estate. The land trust will be the legal owner of the estate, and your name will not appear in any public records that identify property ownership. Only the trust name will exist.”
3. The Process of Selling Real Estate Assets in a Divorce
Sometimes in a divorce, both parties agree to sell the property and then split the proceeds. In this case, there are some things you need to do to protect your portion of the real estate assets.
Set an Asking Price
Pricing appropriately for a sale and in line with market value is critical for selling real estate. That’s why it’s highly recommended that you work closely with a local agent who knows the local market well. To consult a Colorado Springs agent about pricing, just call 719.642.0220.
Prepare for Showings
“Getting the house ready can be the most difficult part of the sale process. There’s often some work that needs to be done – minor repairs, painting, and the like – before the house is ready to be shown, so you need to agree on where the money for that will come from. If both of you have moved out by the time you put the house on the market, you can leave the place to be staged by the agent.”
When offers from potential buyers begin to come in, you’ll have to work together to review them. The problem that arises in a divorce is that people typically just want to get it over with as soon as possible and, as a result, often accept a less than desirable offer. So, again, be sure to lean on your agent’s expertise when reviewing offers.
Divide the Proceeds
The last step in the process will be dividing the proceeds of the sale. “In general, that shouldn’t be too complex – the escrow company can distribute the money, after paying off all the obligations on the house and making whatever other payments you’ve agreed to.”
Usually, the only difficulty that arises here is when “one spouse has been making post-separation mortgage payments, that spouse has probably been reducing the principle amount and increasing the equity, which may increase the amount to be divided between the spouses after the closing costs and obligations have been paid. The distribution should be adjusted to account for the paying spouse’s contribution.”
An Important Aspect of Protecting Real Estate Assets
If you and your spouse/ex-spouse decide to sell property, you’ll likely come out far ahead by working with an experienced Colorado Springs agent. Your agent will have knowledge of the local market and will be able to keep a cool head in order to get you the best deal possible. If your goal is to protect your Colorado Springs real estate assets when going through a divorce, be sure to contact us today at 719.642.0220.