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 to Protect Your Texas Real Estate in a Divorce, especially when it ends in the sale of the home.
Understanding the Importance of Protecting Your Assets
Divorce can be emotionally and financially draining, and failing to prepare for the division of real estate assets can result in significant losses. When real estate is involved, the process becomes even more complex. Whether it’s a marital home, investment property, or land, ensuring that you take strategic steps can prevent unnecessary financial hardships. Protecting your Texas real estate during a divorce is not just about retaining ownership but also about securing your financial future. Seeking expert advice and implementing the right measures can make a significant difference in the outcome of your divorce settlement.
Planning for the Long-Term Impact
A crucial aspect of protecting your real estate assets during a divorce is considering the long-term financial impact of your decisions. Many divorcing couples focus solely on the immediate division of assets without analyzing how their choices will affect their financial future. It’s essential to evaluate whether keeping a property is financially sustainable in the long run.
Property taxes, maintenance costs, and mortgage payments can quickly add up, making it necessary to assess whether selling the property and dividing the proceeds is a more practical option. Consulting with a financial planner can help you determine the best course of action and avoid unforeseen financial struggles post-divorce.
Avoiding Common Mistakes When Handling Real Estate in a Divorce
Many individuals going through a divorce make common mistakes when handling real estate matters, which can lead to financial losses or legal complications. One of the biggest mistakes is failing to seek professional guidance early in the process. Without the expertise of a real estate agent or an attorney who specializes in divorce-related property settlements, you might overlook critical aspects such as capital gains tax implications or refinancing options.
Additionally, not having a well-documented agreement regarding real estate division can create disputes in the future. If one spouse keeps the property, refinancing the mortgage in their name is essential to avoid future liability for the other spouse. Ignoring this step may result in credit issues down the line. Another common error is rushing into a sale without proper valuation, leading to significant financial loss. Ensuring that the property is appraised correctly and understanding the market conditions before listing it can help both parties receive a fair share from the proceeds.
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 Texas 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 payments 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 Texas 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 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 can determine the amount that should be split between the divorcing parties. Maintaining negative equity is the best bet to protect 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 say 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 about 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 sale with market value is necessary to sell real estate. That is why it is advised that you work with a local agent who knows the local market. To consult a Texas agent about pricing, just call at 713-561-5162.
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 principal 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 Texas investor. They will know the local market and will be able to keep a cool head to get you the best deal possible. If your goal is to follow these 3 Tips to Protect Your Texas Real Estate in a Divorce, be sure to contact us today at 713-561-5162.