By Warren R. Shiell
The following information is specific to California.
How do we determine the value of the house?
If you decide to either to buy out the other spouse’s community interest in the house or to exchange it for another asset, you will need to know the equity and financial value of the house. The equity in the house is equal to the house’s fair market value less any debts connected to the house such as mortgages and liens. The fair market value of the house is usually assessed by a certified real estate appraiser. The parties may agree to jointly retain an appraiser to keep down costs. A certified appraiser who knows the local market may provide a more accurate appraisal than the local realtor. Sometimes couples place the house on the market to see of anyone makes any offers.
It is important to note that if the Court is asked to calculate each spouse’s share in the house it will only consider the equity value. The court will not consider other costs that might reduce future sale proceeds such as closing costs, sales commissions and tax bills because those costs are not considered “immediate and specific.” FN5. Therefore, if the fair market value of the house is $500,000 and the balance of all outstanding mortgages is $200,000, the equity value of the house is $300,000. If this is all community interest then each spouse will be entitled to $150,000.
If you are trying to negotiate a settlement, you may wish to argue that the financial value of the house should be considered after taking into account taxes after sale and closing costs. This is important because once you get divorced and awarded the house you are only entitled to a $250,000 exemption on any gain. Therefore what may look like a fair bargain may not seem so fair after you factor in taxes. Consider this example: the equity value of the family home is $500,000 and the equity value of stocks and shares is also $500,000. Is this a fair exchange if the husband keeps the stocks and shares in exchange for the house? It depends. Assume that the shares have a high tax basis so that if they are sold the husband is liable for $100,000 of gain. The wife on the other hand is liable for $250,000 gain if she ever decides to sell the house. Is this still a fair exchange?
(read more on our website)
© 2011 Warren R. Shiell. Warren R Shiell is a Los Angeles Divorce and Family Law attorney. All rights reserved. The information contained in this blog/website is an "Advertisement." It is for informational purposes only and shall not constitute legal advice. Nothing in this Website shall be deemed to create an Attorney-Client relationship. An Attorney-Client relationship shall only be created when this office agrees to represent a Client and a Client signs a written retainer agreement.
For more information visit www.la-familylaw.com
Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell
Call for a free consultation now 310.247.9913.
Divorce and Money
Los Angeles Family Law Attorney
Divorce Lawyers|Attorneys Los Angeles, Beverly Hills
California Prenuptial, Prenups
Showing posts with label community. Show all posts
Showing posts with label community. Show all posts
Sunday, October 02, 2011
Saturday, October 01, 2011
Family Home in Divorce Part III
By Warren R. Shiell
The following information is specific to California.
What are the options for dividing the house?
There are three options if you are trying to reach a settlement:
(a) One spouse buys out the community interest share of the other spouse;
(b) The house is sold and the proceeds are divided; and
(c) The house remains in joint names for a limited period of time and is then sold to the other spouse or is put on the market.
During economic downturns when house prices are depressed couples increasingly turn to the last option.
But there is a catch. If you litigate, option (c) is called a deferred sale order (or a “Duke Order”) and the Court can only order a deferred sale in very limited circumstances where it is in lieu of child support and economically feasible. FN3.
Should I keep the house or exchange it for other assets?
It is very important to consider the financial as well as the legal realities of electing to keep the house. It is used to be very common where the husband owns a business to suggest that the wife keeps the house and the husband keeps the business. Before even getting into whether this is a fair exchange of assets of equal value, one has to consider whether the spouse who wants to keep the house can afford to do so. Often the spouse who has primary custody of children wants to stay in the house for the sake of the children but this may not be economically possible. The spouse who wants to stay in the home should sit down and work out a budget. They should estimate housing costs and compare this with their estimate earnings from employment, support and other sources. Housing costs are more than just mortgage and property taxes and one should factor in utilities, repairs, insurance, fees etc. You may also be entitled to mortgage interest deduction relief lowering your costs. If you can still afford to stay in the house, only then should you consider this option.
(read more on our website)
© 2011 Warren R. Shiell. Warren R Shiell is a Los Angeles Divorce and Family Law attorney. All rights reserved. The information contained in this blog/website is an "Advertisement." It is for informational purposes only and shall not constitute legal advice. Nothing in this Website shall be deemed to create an Attorney-Client relationship. An Attorney-Client relationship shall only be created when this office agrees to represent a Client and a Client signs a written retainer agreement.
For more information visit www.la-familylaw.com
Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell
Call for a free consultation now 310.247.9913.
Divorce and Money
Los Angeles Family Law Attorney
Divorce Lawyers|Attorneys Los Angeles, Beverly Hills
California Prenuptial, Prenups
The following information is specific to California.
What are the options for dividing the house?
There are three options if you are trying to reach a settlement:
(a) One spouse buys out the community interest share of the other spouse;
(b) The house is sold and the proceeds are divided; and
(c) The house remains in joint names for a limited period of time and is then sold to the other spouse or is put on the market.
During economic downturns when house prices are depressed couples increasingly turn to the last option.
But there is a catch. If you litigate, option (c) is called a deferred sale order (or a “Duke Order”) and the Court can only order a deferred sale in very limited circumstances where it is in lieu of child support and economically feasible. FN3.
Should I keep the house or exchange it for other assets?
It is very important to consider the financial as well as the legal realities of electing to keep the house. It is used to be very common where the husband owns a business to suggest that the wife keeps the house and the husband keeps the business. Before even getting into whether this is a fair exchange of assets of equal value, one has to consider whether the spouse who wants to keep the house can afford to do so. Often the spouse who has primary custody of children wants to stay in the house for the sake of the children but this may not be economically possible. The spouse who wants to stay in the home should sit down and work out a budget. They should estimate housing costs and compare this with their estimate earnings from employment, support and other sources. Housing costs are more than just mortgage and property taxes and one should factor in utilities, repairs, insurance, fees etc. You may also be entitled to mortgage interest deduction relief lowering your costs. If you can still afford to stay in the house, only then should you consider this option.
(read more on our website)
© 2011 Warren R. Shiell. Warren R Shiell is a Los Angeles Divorce and Family Law attorney. All rights reserved. The information contained in this blog/website is an "Advertisement." It is for informational purposes only and shall not constitute legal advice. Nothing in this Website shall be deemed to create an Attorney-Client relationship. An Attorney-Client relationship shall only be created when this office agrees to represent a Client and a Client signs a written retainer agreement.
For more information visit www.la-familylaw.com
Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell
Call for a free consultation now 310.247.9913.
Divorce and Money
Los Angeles Family Law Attorney
Divorce Lawyers|Attorneys Los Angeles, Beverly Hills
California Prenuptial, Prenups
Friday, September 30, 2011
Family Home in Divorce Part II
By Warren R. Shiell
The following information is specific to California.
What are the options for dividing the house?
There are three options if you are trying to reach a settlement:
(a) One spouse buys out the community interest share of the other spouse;
(b) The house is sold and the proceeds are divided; and
(c) The house remains in joint names for a limited period of time and is then sold to the other spouse or is put on the market.
During economic downturns when house prices are depressed couples increasingly turn to the last option.
But there is a catch. If you litigate, option (c) is called a deferred sale order (or a “Duke Order”) and the Court can only order a deferred sale in very limited circumstances where it is in lieu of child support and economically feasible. FN3.
Must the house be sold?
If the home is only asset of value in the marriage, the house may have to be sold unless one spouse is able to raise sufficient funds to buy out the other. Otherwise there are several ways to buy out a spouse’s interest in the family home.
1. One party may be able to buy the other out if they can re-finance and qualify for a new mortgage on their own using their own income. The selling spouse should never agree to remain on the mortgage.
2. If refinancing does not generate sufficient income, the selling spouse may be persuaded to accept an installment note secured by a deed of trust on the home. This is generally a bad idea. A spouse who cannot afford an immediate buy out upon divorce, in the long run is probably not going to pay all the costs associated with maintaining a home and pay back the installment loan.
3. Another option is buying out all or some of the community interest in the house with a release of spousal support. You will need to consult with an attorney and a tax specialist to determine the present and after tax value of the total support payments that are being exchanged.
4. It may also be possible to borrow from a retirement plan to finance the buy out. Again you should consult with a pension and tax specialist to discuss the costs of borrowing from your retirement plan. You may have to pay income taxes on the withdrawal and 10% early withdrawal penalties. You should also find out whether such a loan qualifies for mortgage interest deduction on your taxes. FN4
5. If there are other assets in the marriage, one spouse may elect to keep the house and the other may keep assets of equal value. For example, if the equity in the house is $200,000 and the value of pensions is $200,000 one spouse may keep the house and the other may keep the pensions. This is discussed in more detail below.
(read more on our website)
© 2011 Warren R. Shiell. Warren R Shiell is a Los Angeles Divorce and Family Law attorney. All rights reserved. The information contained in this blog/website is an "Advertisement." It is for informational purposes only and shall not constitute legal advice. Nothing in this Website shall be deemed to create an Attorney-Client relationship. An Attorney-Client relationship shall only be created when this office agrees to represent a Client and a Client signs a written retainer agreement.
For more information visit www.la-familylaw.com
Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell
Call for a free consultation now 310.247.9913.
Divorce and Money
Los Angeles Family Law Attorney
Divorce Lawyers|Attorneys Los Angeles, Beverly Hills
California Prenuptial, Prenups
The following information is specific to California.
What are the options for dividing the house?
There are three options if you are trying to reach a settlement:
(a) One spouse buys out the community interest share of the other spouse;
(b) The house is sold and the proceeds are divided; and
(c) The house remains in joint names for a limited period of time and is then sold to the other spouse or is put on the market.
During economic downturns when house prices are depressed couples increasingly turn to the last option.
But there is a catch. If you litigate, option (c) is called a deferred sale order (or a “Duke Order”) and the Court can only order a deferred sale in very limited circumstances where it is in lieu of child support and economically feasible. FN3.
Must the house be sold?
If the home is only asset of value in the marriage, the house may have to be sold unless one spouse is able to raise sufficient funds to buy out the other. Otherwise there are several ways to buy out a spouse’s interest in the family home.
1. One party may be able to buy the other out if they can re-finance and qualify for a new mortgage on their own using their own income. The selling spouse should never agree to remain on the mortgage.
2. If refinancing does not generate sufficient income, the selling spouse may be persuaded to accept an installment note secured by a deed of trust on the home. This is generally a bad idea. A spouse who cannot afford an immediate buy out upon divorce, in the long run is probably not going to pay all the costs associated with maintaining a home and pay back the installment loan.
3. Another option is buying out all or some of the community interest in the house with a release of spousal support. You will need to consult with an attorney and a tax specialist to determine the present and after tax value of the total support payments that are being exchanged.
4. It may also be possible to borrow from a retirement plan to finance the buy out. Again you should consult with a pension and tax specialist to discuss the costs of borrowing from your retirement plan. You may have to pay income taxes on the withdrawal and 10% early withdrawal penalties. You should also find out whether such a loan qualifies for mortgage interest deduction on your taxes. FN4
5. If there are other assets in the marriage, one spouse may elect to keep the house and the other may keep assets of equal value. For example, if the equity in the house is $200,000 and the value of pensions is $200,000 one spouse may keep the house and the other may keep the pensions. This is discussed in more detail below.
(read more on our website)
© 2011 Warren R. Shiell. Warren R Shiell is a Los Angeles Divorce and Family Law attorney. All rights reserved. The information contained in this blog/website is an "Advertisement." It is for informational purposes only and shall not constitute legal advice. Nothing in this Website shall be deemed to create an Attorney-Client relationship. An Attorney-Client relationship shall only be created when this office agrees to represent a Client and a Client signs a written retainer agreement.
For more information visit www.la-familylaw.com
Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell
Call for a free consultation now 310.247.9913.
Divorce and Money
Los Angeles Family Law Attorney
Divorce Lawyers|Attorneys Los Angeles, Beverly Hills
California Prenuptial, Prenups
Thursday, September 29, 2011
Family Home in Divorce Part I
By Warren R Shiell
The following information is specific to California.
In many divorces, the biggest financial question is who gets the family home. Should the wife get it, should the husband, or should they sell it and split the proceeds? And if they sell it how should the proceeds be divided.
Many times, the wife has an emotional tie to the home and she wants to keep it. This is where she raised their children and decorated and entertained. But she needs to consider whether she can afford to keep the home. If she keeps the house she is getting an illiquid asset that does not buy groceries for her children or create any income.
The first issue that must be considered is who owns the house. Is it entirely community property that should be split equally or does one spouse have a claim to a greater share.
Who owns the house?
Often the family home is the most important asset that a family owns. In a divorce the first question that a couple must consider is who owns the family home. Is it entirely community property that should be divided equally or does one spouse have a separate property interest that would result in an unequal division.
In California, there is a presumption that property acquired during the marriage is community property and each spouse is entitled to an equal share upon divorce. However, in the case of the family home this presumption may not apply if title is not in joint names. For example, if a house is purchased during the marriage but only one spouse’s name is on the title that spouse may be able to claim that the entire property is their separate property and that they do not have to share it with the other spouse. FN1. This can lead to very unfair results if the mortgage was paid during the marriage with community earnings or the downpayment was made with community savings. To avoid this result the disadvantaged spouse has to prove that there was a breach of a fiduciary duty and the Court should treat the house as community. If you are ever in this situation you need to immediately consult with an experienced family lawyer. Further, if your credit is bad and your spouse ever tries to convince you that the only way to get a mortgage is to put title in their name you should immediately consult with an attorney.
Another common situation is where one spouse owns a house prior to marriage. During the marriage the title remains in that spouse’s name but the outstanding mortgage is paid with community earnings. The spouse who is not on title may still have a community property interest by virtue of the mortgage payments made with community earnings. This is commonly referred to as a “Moore-Marsden” interest based on the two cases that establish the formula for calculating the community interest. FN2. When a couple have been married a long time and substantial amounts of community earnings have paid off an existing mortgage, making improvements or the parties have re-financed, this “Moore-Marsden” interest can be substantial.
You may wonder why this situation is so different to the one above where the home is acquired during the marriage in one spouse’s name. The simple answer is that’s what the Courts have decided. If you are ever in this situation you need to immediately consult with an experienced family lawyer.
(read more on our website)
© 2011 Warren R. Shiell. Warren R Shiell is a Los Angeles Divorce and Family Law attorney. All rights reserved. The information contained in this blog/website is an "Advertisement." It is for informational purposes only and shall not constitute legal advice. Nothing in this Website shall be deemed to create an Attorney-Client relationship. An Attorney-Client relationship shall only be created when this office agrees to represent a Client and a Client signs a written retainer agreement.
For more information visit www.la-familylaw.com
Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell
Call for a free consultation now 310.247.9913.
Divorce and Money
Los Angeles Family Law Attorney
Divorce Lawyers|Attorneys Los Angeles, Beverly Hills
California Prenuptial, Prenups
The following information is specific to California.
In many divorces, the biggest financial question is who gets the family home. Should the wife get it, should the husband, or should they sell it and split the proceeds? And if they sell it how should the proceeds be divided.
Many times, the wife has an emotional tie to the home and she wants to keep it. This is where she raised their children and decorated and entertained. But she needs to consider whether she can afford to keep the home. If she keeps the house she is getting an illiquid asset that does not buy groceries for her children or create any income.
The first issue that must be considered is who owns the house. Is it entirely community property that should be split equally or does one spouse have a claim to a greater share.
Who owns the house?
Often the family home is the most important asset that a family owns. In a divorce the first question that a couple must consider is who owns the family home. Is it entirely community property that should be divided equally or does one spouse have a separate property interest that would result in an unequal division.
In California, there is a presumption that property acquired during the marriage is community property and each spouse is entitled to an equal share upon divorce. However, in the case of the family home this presumption may not apply if title is not in joint names. For example, if a house is purchased during the marriage but only one spouse’s name is on the title that spouse may be able to claim that the entire property is their separate property and that they do not have to share it with the other spouse. FN1. This can lead to very unfair results if the mortgage was paid during the marriage with community earnings or the downpayment was made with community savings. To avoid this result the disadvantaged spouse has to prove that there was a breach of a fiduciary duty and the Court should treat the house as community. If you are ever in this situation you need to immediately consult with an experienced family lawyer. Further, if your credit is bad and your spouse ever tries to convince you that the only way to get a mortgage is to put title in their name you should immediately consult with an attorney.
Another common situation is where one spouse owns a house prior to marriage. During the marriage the title remains in that spouse’s name but the outstanding mortgage is paid with community earnings. The spouse who is not on title may still have a community property interest by virtue of the mortgage payments made with community earnings. This is commonly referred to as a “Moore-Marsden” interest based on the two cases that establish the formula for calculating the community interest. FN2. When a couple have been married a long time and substantial amounts of community earnings have paid off an existing mortgage, making improvements or the parties have re-financed, this “Moore-Marsden” interest can be substantial.
You may wonder why this situation is so different to the one above where the home is acquired during the marriage in one spouse’s name. The simple answer is that’s what the Courts have decided. If you are ever in this situation you need to immediately consult with an experienced family lawyer.
(read more on our website)
© 2011 Warren R. Shiell. Warren R Shiell is a Los Angeles Divorce and Family Law attorney. All rights reserved. The information contained in this blog/website is an "Advertisement." It is for informational purposes only and shall not constitute legal advice. Nothing in this Website shall be deemed to create an Attorney-Client relationship. An Attorney-Client relationship shall only be created when this office agrees to represent a Client and a Client signs a written retainer agreement.
For more information visit www.la-familylaw.com
Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell
Call for a free consultation now 310.247.9913.
Divorce and Money
Los Angeles Family Law Attorney
Divorce Lawyers|Attorneys Los Angeles, Beverly Hills
California Prenuptial, Prenups
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