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 Massachusetts real estate assets when going through a divorce, especially when it ends in the sale of the home.
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 Massachusetts real estate assets in a divorce . . .
Prepare Before Filing
It’s crucial to remember that nearly all assets and liabilities are divisible during a divorce settlement. This includes properties, bank accounts, investments, debts, and even personal belongings. Before filing for divorce, take proactive measures to safeguard what you can. Start by documenting all assets and liabilities, noting their current values and any pertinent details. This will help you have a clear picture of what might be divided.
You will also want to gather key evidence to support any claims you plan to present in court. This could include financial records, communications, or any documentation that demonstrates ownership or contributions to specific assets. Finally, it would be wise to consult with a legal professional to understand your rights and the best strategies for protecting your interests. By taking these steps, you can better prepare for the complexities of a divorce settlement and work towards a fair division of assets.
Inventory Non-Marital Assets
Take the time to compile a thorough list of all the property you acquired before your marriage and gather all the supporting evidence and documentation. This includes deeds, mortgage statements, tax records, and any other relevant paperwork that can establish your ownership prior to the marriage. Ensuring that you have detailed records of your pre-marital assets is crucial in protecting your interests during the divorce proceedings.
This means collecting and organizing your real estate records, financial statements, and other pertinent documents before your spouse hands you the divorce papers. By having this information readily available, you can more effectively demonstrate which assets are rightfully yours, potentially saving time, reducing conflict, and protecting your financial well-being during what can be an emotionally and financially challenging time.
Get an Accurate Valuation of Your Real Estate Assets
Most people tend to overlook the significant tax implications associated with their investments, particularly those involving deferred tax payments on retirement accounts. It is crucial to remember that withdrawing funds from these accounts before reaching the eligible age can result in substantial penalties, in addition to the taxes owed on the amount withdrawn.
During divorce proceedings, these factors must be carefully considered when appraising the value of property and investments. Early withdrawals from retirement accounts, for example, could diminish the overall value of the assets due to penalties and taxes, potentially affecting the equitable distribution between spouses. It is also essential to consider other tax implications, such as capital gains taxes on investments or potential future tax liabilities.
By thoroughly understanding and accounting for these tax implications, individuals can make more informed decisions and ensure a fair division of assets. Consulting with financial advisors or tax professionals can provide valuable insights and help navigate the complex tax landscape during a divorce, ultimately leading to a more equitable resolution for both parties.
Choose Battles Wisely
The simple fact is that not everything is worth fighting for during a divorce, especially when you consider the high cost of attorneys. Before entering into legal battles over specific assets, it’s important to weigh the value of the asset against the potential attorney fees and other legal costs that are sure to rack up as time goes on. For instance, spending thousands of dollars in legal fees to fight for an asset worth only a fraction of that amount may not be a wise decision.
Additionally, the emotional toll of prolonged legal disputes can be significant, potentially affecting your well-being and that of your family. It’s essential to consider not only the financial implications but also the emotional costs when deciding whether to pursue certain assets.
Taking a step back and assessing the overall picture can help you make more strategic decisions. Sometimes, it may be more beneficial to compromise on certain items to achieve a quicker, more amicable resolution. By doing so, you can save money on legal fees and reduce the emotional strain of the divorce process. Ultimately, focusing on the most valuable and important assets while letting go of less significant ones can lead to a more efficient and less costly divorce.
Consider Getting a Mediator
Divorces are notoriously expensive, and the outcomes often don’t align with your expectations or desires. One way to mitigate these costs and streamline the process is by considering the use of a mediator. A mediator serves as a neutral third party who can facilitate discussions and negotiations between you and your spouse, helping to reach an amicable divorce agreement.
Unlike traditional litigation, which can be both time-consuming and costly due to attorney fees and court costs, mediation offers a more affordable alternative. By working with a mediator, you can significantly reduce legal expenses while still ensuring that both parties’ concerns and interests are addressed. Mediators are trained to handle sensitive issues, promote open communication, and assist in finding mutually agreeable solutions, making the process less adversarial and more cooperative.
Moreover, mediation can be tailored to fit your specific needs and schedule, providing a more flexible and personalized approach to resolving disputes. This can be particularly beneficial if you have children, as mediation often focuses on fostering a collaborative environment that prioritizes the well-being and stability of the family.
Ultimately, choosing mediation over traditional divorce proceedings not only helps in saving money but also reduces the emotional stress associated with contentious legal battles. It empowers both parties to take control of their future, ensuring that the final agreement is one that you have actively participated in creating, rather than one imposed by a court.
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 Massachusetts 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 Massachusetts agent about pricing, just call (781) 258-6976.
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.
Review Offers
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 Massachusetts investor. They 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 Massachusetts real estate assets when going through a divorce, be sure to contact us today at (781) 258-6976.