Should I Keep the House or Not? Asset Management Advice for Del Mar Residents Going Through Divorce, PART 4

This four-part article series poses a series of questions to help people going through divorce decide whether it is in their best financial interests to keep the house or to sell it and split the money.

Welcome to the final installment of this four-part article series on whether it’s a good or bad idea for you to keep the house post-divorce. So far, we have posed the following exigent questions to Del Mar residents facing this situation and the totally new asset management picture that comes with it:

1.    What does your house mean to you and could you perhaps find its virtues in another home elsewhere?
2.    How long do you plan on staying in your house post-divorce?
3.    Does it make financial sense to continue to own the house jointly with your ex?
4.    If you do opt to keep the home, what assets of yours would you have to sacrifice to compensate for your ex’s equity?

Let’s continue with two final questions you should be asking yourself if you’re considering keeping the house post-divorce.

“Should I Keep the House?”

Question # 5: Can You Afford to Keep the House and to Pay its Mortgage?

Image courtesy of Free Digital Photos

You may be seduced by your current low mortgage rates, but deciding to take the house in divorce begins a long and costly chain of events that could see you regretting this decision in the first place.

When one spouse takes the house, he or she will need to have the mortgage refinanced so that the other spouse’s name is taken off the mortgage agreement. This process costs money and then you’re facing new monthly payments that, at today’s interest rates, aren’t quite as favorable anymore. So be wary, say asset management experts in Del Mar.

In addition to refinancing, you’re also looking at the responsibility of being the only one who pays for the maintenance and upkeep of the property. This might become especially expensive if it has been months or even years since you and your ex put any effort into fixing and maintaining the house.

Keeping a house that hasn’t received any maintenance or upkeep in more than a year could end up being a catastrophic financial decision for residents. You’re not only inheriting a house that is falling down around you, but also all of the bills that come hand-in-hand with it. If you sense your marriage is on the rocks and want to keep the house, many Del Mar LPL financial advisors suggest that you begin the process of fixing and maintaining it while your assets are still shared.

“Should I Keep the House?”

Question # 6: Do You Understand the Tax Consequences of Keeping the House?

When it comes to tax, if you’re not in the know, you stand to lose a considerable amount of money.

Oftentimes, it benefits both partners to simply sell the home jointly while it’s listed under both of your names. If you have lived in a home for between two to five years before you decide to sell it, you can exclude $250,000 of its capital gain from your tax bill, and $500,000 if you sell it jointly with your ex, according to asset management law.

Image courtesy of Free Digital Photos

But, if you keep the house and refinance it so that you become the sole owner, you alone shoulder the capital gains liability and the cost of the sale. If your home has appreciated in value by more than $250,000, you will be responsible for paying tax on that excess, whereas if you had simply sold the house while it was under both of your names, the $500,000 exclusion would have saved you all of that money on tax.

This is something Del Mar residents should calculate and consider with the help of a financial advisor before making any major decisions with regards to home ownership.

Investment Advisor News, Del Mar: The 8 Possible Financial Consequences Of Divorce And How To Avoid Them, PART 1

This four-part article series explains the many financial pitfalls associated with divorce and how women can best avoid them through careful research and the right planning.

“50% of first, 67% of second and 74% of third marriages end in divorce,” says Jennifer Baker of the Forest Institute of Professional Psychology in Springfield, Missouri.

-    Source: http://www.divorcepad.com/rate/

These may seem like terrible and depressing statistics, but they highlight just how important it is for women to make financial provisions in the event that their marriage too becomes another statistic. So, if you find yourself in a position where you are considering divorce, it is crucial that you begin making plans and doing the necessary research to equip yourself to face the impending and potentially rough financial times.

In this four-part article series, I explore, with the help of some investment advisors in Del Mar, the 8 possible financial consequences of divorce and how you can avoid them with the right planning.

Consequences of Divorce # 1: Empty Pockets

If you lamented the cost of living before, things are about to get a whole lot more expensive!

“You’ll likely find yourself dipping into your savings to foot the cost of your legal bills,” warn Del Mar financial advisors.

Then there’s the cost of moving out, getting a new place, seeing a psychologist and that exorbitant “accidental” retail therapy session at Oscar de la Renta. Divorce is not only a change of marital status; it’s a whole life revolution and money is needed to facilitate this change.

What You Should Do

If you foresee your marriage ending in divorce – whether it’s what you want or don’t want – do NOT sit about moping. You need to start squirreling away funds to sustain you through the expensive aftermath.

Consequences of Divorce # 2: Being Ill Prepared

Ending a relationship with a spouse is one thing: a single conversation that can take place in as little as an hour. It’s what happens afterwards that can take months and even years to sort out. This is why careful planning is so crucially important if it looks as though your marriage is going to end in divorce. Before you drop the figurative guillotine on your husband’s head, do some thorough research. Chat with a lawyer and your Del Mar financial and investment advisor about what you need to do and what you need to make provisions for.

Timing is also important. If your husband is due for a promotion, bonus, inheritance or raise, you may want to wait until he receives it so that you too can benefit. If you’re a few months away from the 10-year mark, patience and social security can reward you with your partner’s earning record. This may sound unscrupulous, but just as he has given up his time and energy earning that income, raise or bonus so too have you.

Whether you spent your time raising your family, tending to the house, in the office or all three, you are a team and all of your assets should be shared accordingly.

What You Should Do

Take the time to complete the things that need to be done before the financial and emotional turmoil hits at full force. While you still have access to joint funds, take the car in for a full service; perhaps get some new tires. Buy the kids the clothes they need and take them to the dentist. Book yourself a few appointments with a therapist, your financial advisor and perhaps a lawyer. This kind of planning can save you a lot of money and a lot of hassle post-divorce.

Stay Tuned for Part 2

Not sorting out your documents and overlooking assets… To read more about the possible financial consequences of divorce for women, stay tuned for the second installment of this four-part article series.