by Joan Rogliano, www.roglianorealestategroup.com
Each state has different laws, so please check with a legal adviser in your home state. As I am a licensed Realtor, (not an attorney) in CO, the illustrations I’m using are based on CO law.
Many people transitioning through a divorce want to distance themselves from the other party as quickly as possible and this can result in poor, and ultimately expensive, mistakes. Prematurely paying off joint credit cards, selling personal property, and buying or selling real estate are some examples that require extreme caution prior to the final settlement.
Buying a new home is a common first step to cleanse a person of the divorce experience. They want to leave the marital home and strike out on their own, make a fresh start and solidify their independence. What better way to express their new situation than to create an oasis in the form of a new home.
The question arises frequently. Can a person purchase a new home prior to the final divorce decree? Usually, but it must be done very carefully. The buying party must have legal counsel mapping the way, and preparing the necessary documents. If care is not taken with the correct legal process approved by the court, the shiny new home can go into the pot of marital property.
An attorney must be retained to negotiate and prepare an agreement between the parties that will hold up in court. In order for the agreement to allow a spouse to buy a new home that is excluded from the marital property division process, the agreement:
1. Must be in writing, signed by the parties and approved by the court
2. Contain terms concerning the title and the equity
3. Be signed only after there has been full financial disclosure of both parties.
If these items are not fulfilled, the agreement may be deemed invalid. This could result in the home, or the increase in the value of the new home, declared marital property subject to division. The topic of furnishings for the new home must also be addressed to establish clear ownership.
Imagine the worst case scenario. A supportive family wants to help their divorcing relative make a new start and gives them funds to buy a new place. They, of course, did not intend the property to be for the benefit of both parties and carefully confirmed the title was in one name only. The title can be immaterial, the home determined marital property and a sale forced by the court. The proceeds would then be equally divided and a very generous offer has gone terribly awry.
A current client has an extra wrinkle because her family is South American. She is dealing with the exchange rate, foreign bank regulations, and the need to provide a gift letter from her family. They must show a paper trail of the funds leaving their account in South America to eliminate any suspicion of money laundering. While the situation is currently amicable and her soon to be ex husband assures that he will not lay claim to the new house, she has retained an attorney to draw up the necessary legal documents to be filed with the court. She’ll absorb the expense now to save a lot of aggravation, possible heartbreak, and greater expense later.