Monday, June 23, 2008
From Marriage Partners to Business Partners
Dear Sue,
I am in the middle of divorcing my husband. Thank God it is an amicable separation, but we still must divide over 25 years of accumulated assets.
Since the real estate market isn’t very kind to sellers right now, we both think that trying to sell our home right now would be a bad idea. We want to sever the attachments of our relationship as soon as possible, but we think it is better to wait to sell our home when prices may be higher.
Is there any way of selling our home later while going our separate ways now?
Separated Sally
Dear Sally,
In my experience working with attorneys and divorce, the division of community property is never easy. In many cases it is down right messy! I am happy to hear that your separation is amicable.
The last asset to be divided in a divorce is usually the home. Since it is symbolically the last connection in the relationship, frequently the ex-partners can have great difficulty letting go. Did you ever see the movie, “War of the Roses?”
Since letting go is really a process, it may be wise to take your time and not rush into a sale, especially in the current downturn.
As I see it, you have several options. The first option, which is the most common, is to sell immediately and divide the remaining equity, if any. If there is no equity, a short sale or foreclosure may be the only options if you choose to sell now.
If you choose to sell later you must treat your home as a business asset or investment property. This requires an evolution from romantic partners to business partners. It requires that you both be objective and analytical in your dealings. This can be very difficult if not impossible unless you engage a neutral third party such as a mediator, business advisor or property manager.
Selling later will require that your home become an investment or rental property. If one of the partners wants to live in the property, the partner will become a tenant while also being a landlord. This means that the tenant partner will pay rent but also share in the expenses of principal and interest payments, maintenance, repair, taxes and insurance.
For example, if the rent is $1400 a month (determined by the current rental market) and the payment including taxes and insurance is $1000 a month, the partners divide the $400. If repairs or maintenance are required, both parties share the burden 50/50. The write-offs and tax benefits of owning the investment property are also shared.
For tax purposes, don’t hold the home as rental property more than three years if you want to take advantage of the $250,000 each, tax free gain only available on personal residences.
You may find that you are better business partners than romantic partners and decide to keep the investment property.
Making the transition from romantic partners to business partners can be a matter of Good Home $$s and Sense.
I am in the middle of divorcing my husband. Thank God it is an amicable separation, but we still must divide over 25 years of accumulated assets.
Since the real estate market isn’t very kind to sellers right now, we both think that trying to sell our home right now would be a bad idea. We want to sever the attachments of our relationship as soon as possible, but we think it is better to wait to sell our home when prices may be higher.
Is there any way of selling our home later while going our separate ways now?
Separated Sally
Dear Sally,
In my experience working with attorneys and divorce, the division of community property is never easy. In many cases it is down right messy! I am happy to hear that your separation is amicable.
The last asset to be divided in a divorce is usually the home. Since it is symbolically the last connection in the relationship, frequently the ex-partners can have great difficulty letting go. Did you ever see the movie, “War of the Roses?”
Since letting go is really a process, it may be wise to take your time and not rush into a sale, especially in the current downturn.
As I see it, you have several options. The first option, which is the most common, is to sell immediately and divide the remaining equity, if any. If there is no equity, a short sale or foreclosure may be the only options if you choose to sell now.
If you choose to sell later you must treat your home as a business asset or investment property. This requires an evolution from romantic partners to business partners. It requires that you both be objective and analytical in your dealings. This can be very difficult if not impossible unless you engage a neutral third party such as a mediator, business advisor or property manager.
Selling later will require that your home become an investment or rental property. If one of the partners wants to live in the property, the partner will become a tenant while also being a landlord. This means that the tenant partner will pay rent but also share in the expenses of principal and interest payments, maintenance, repair, taxes and insurance.
For example, if the rent is $1400 a month (determined by the current rental market) and the payment including taxes and insurance is $1000 a month, the partners divide the $400. If repairs or maintenance are required, both parties share the burden 50/50. The write-offs and tax benefits of owning the investment property are also shared.
For tax purposes, don’t hold the home as rental property more than three years if you want to take advantage of the $250,000 each, tax free gain only available on personal residences.
You may find that you are better business partners than romantic partners and decide to keep the investment property.
Making the transition from romantic partners to business partners can be a matter of Good Home $$s and Sense.
# posted by Sue Thompson @ 8:48 AM 
Subscribe to Posts [Atom]
