Dividing Joint Property Real Estate in a Divorce Settlement
Joint property real estate likely represents the majority of all the assets to be divided in a divorce settlement agreement. You must determine the fair market value of the joint property, which is basically equity minus any debts that are secured by the property. The joint property includes not only the family home, but also any other types of real estate that may be community property, including vacation homes, rental properties, commercial properties, undeveloped land, and special use real estate such as mineral and water rights. Each of these has unique circumstances that will determine how they are eventually handled in the divorce settlement agreement.[expand title=”Read More” swaptitle=” Read Less”]
One way of thinking is to treat all joint properties as if they are to be sold outright in the final divorce settlement. If one of the parties to the divorce wishes to gain full ownership of any of that property (one common example being to continue to live in the primary dwelling) the transaction would be treated as if they are the buyer of the property. In such a situation, keep in mind that upkeep of the property such as loan payments and tax liabilities becomes the burden of the newly sole owner. Other than determining the fair market value for the purpose of property ownership during divorce the history of your community property is also a factor in determining things like the division of mineral rights in divorce agreements.
History of Community Property Real Estate Ownership The history of the property can affect how the division of marital property will be divided. Property brought to the marriage or inherited during the marriage poses the question of whether or not the property has become joint property or remains the property of one of the parties to the divorce settlement. Not only the history but also the future must be considered. Any future financial or environmental risks that will fall to the new owner, should be considered as a cost that must be evaluated when determining the division of equity. Properties that are intended for special use or bear mineral or water rights might also be affected by the history of the property. For example, in terms of what benefits have accrued to date and what a reasonable expectation of future benefits might be. Again, evaluation of any financial or environmental risk falling to the new owner may have an effect on the equity itself and therefore on the divorce and real estate negotiations. Appropriate counsel should be sought to help clarify and quantify these issues. Review these five key factors about your real estate that affects the handling of the joint asset or the distribution of net proceeds from a sale of assets in a settlement agreement.
- Identification of the type of real estate and the type of ownership interest you have in the joint property.
- The ownership history of your real estate.
- Real estate, income and capital gain taxes.
- Debts, such as loans and tax liens that are secured by the value of the real estate.
- The plans you must make to pay for and maintain the real estate as the divorce is pending.