There is more to address in a divorce settlement agreement than just the disbursement of net proceeds or equity ownership in a divorce situation.
A mortgage escrow account is designed to hold a homeowner's periodic payments for real estate taxes, mortgage insurance, and possibly homeowner's insurance. Mortgage escrow accounts normally build up large balances at times because of the timing of payments made from them. Any excess mortgage escrow account balances must be properly accounted for and then refunded after homeowners sell their homes.
Mortgage escrow accounts accumulate money over several months, usually from borrowers' prorated payments for their real estate taxes. In most parts of the country, counties require property tax payments on a semi-annual or annual basis, meaning escrow accounts tend to build up until taxes are paid.
If the home is sold before tax and insurance payments are made, there will most likely be funds remaining in the escrow account. Lenders are required...
During a marriage, the financial identity of both spouses may become comingled due to joint bank accounts, joint credit cards, co-mortgagees, and more. Protecting yourself or your clients from financial identity theft during and after the divorce is final should be a top priority.
According to the Federal Trade Commission, identity theft falls into six major categories:
Real Estate, whether it is the marital home or investment property, is one of the greatest assets owned by married couples. Typically in a divorce situation, the property is sold or retained by one party, and ownership is transferred solely into their name.
When real estate property owned is sold, each party may be subject to capital gains tax. Depending on the value of the property at the time of the sale vs. the initial acquisition cost plus improvements, it may be wise to speak with a financial planner to weigh all options such as a 1031 exchange. (IRC Section 1031 – like-kind exchange)
Per IRS rules, a 1031 like-kind exchange provides an exception that allows you to postpone paying capital gains taxes if you reinvest the proceeds from the sale of an investment property (the “relinquished property”) into a similar property (the “replacement property”) as part of a qualifying like-kind exchange. The seller has 45 days to identify a...
One of the main concerns, when one party is retaining the marital home, is that the vacating or out spouse will not be able to qualify for future mortgage financing while their name remains tied to the current mortgage. This isn’t necessarily so, and we can help our divorcing clients with this issue with the correct verbiage contained in the final divorce settlement agreement.
When a borrower has an outstanding debt that was assigned to another party by court order (such as under a divorce decree or separation agreement) and the creditor does not release the borrower from liability, the borrower has a contingent liability. The lender may not be required to count this contingent liability as part of the borrower’s recurring monthly debt obligations.
Contingent liabilities are debts that a court orders one party the responsibility of paying yet does not relinquish the legal obligation of paying the commitment to the creditor. In a divorce situation, often times a mortgage...
There may be a widely overlooked tax consequence as many divorcing couples who own investment properties often move into a rental home as their new primary residence.
The Housing Assistance Tax Act of 2008 provides four important tax law changes that impact individuals and small businesses. These tax laws are part of the larger Housing and Economic Recovery Act of 2008 (HR 3221, Public Law 110-289) which provides a number of laws relating to housing and mortgages.
One of the highlighted tax law changes is related to prorated capital gains exclusion for real estate for periods of non-primary use. This may be a concern for divorcing clients when one spouse retains a current investment property to be used as their new primary residence.
Under the Housing Assistance Tax Act of 2008, the IRS now wants its share of the capital gains tax during the period from January 1, 2009, up...
The deed, decree, and debt all intersect during divorce yet all three need to be dealt with separately in the settlement process.
When transferring ownership of the marital home from jointly held ownership or from sole ownership to the other spouse, using the correct transfer deed is important for protecting the new sole owner. A Quit Claim deed is the most commonly used transfer deed yet, provides the least protection to the receiving spouse. Without warranties, it offers the grantee little or no recourse against the grantor if a problem with the title arises in the future.
A Warranty Deed may be a much better choice as it provides the most protection to the new owner. This type of deed guarantees that the grantor holds clear title to a piece of real estate and has a right to sell it to the grantee. The guarantee is not limited to the time the grantor owned the property as with a special warranty deed; rather, it extends back to the property’s earliest title. As...