Divorce is never something you plan on, and it’s far from a pleasant experience. But it does happen, and the divorce process is usually complicated and sometimes ugly, especially when it comes to real estate assets. Certainly, you should hope for and work toward the best and most amicable outcome, but you should also prepare for the worst – if, that is, you want to protect your assets. With that in mind, we offer these 3 tips for protecting your South Carolina real estate assets when going through a divorce, especially when it ends in the sale of the home.
1. Take the Necessary First Steps
Emotions can run incredibly high during a divorce, but it’s essential to approach the situation with a clear head. In the midst of emotional turmoil, it’s easy to get caught up in disputes over property or decisions that are driven more by feelings than logic. However, taking the necessary steps to proceed logically and rationally can help protect your financial future and reduce the stress of the process. This means making decisions that prioritize your long-term well-being, such as quickly and fairly selling the house, so that both parties can move forward without unnecessary delays or financial strain. By focusing on practical solutions, you can regain control of the situation and work toward a resolution that benefits both you and your future. Here, then, are some preparatory steps you should take early on to protect your South Carolina real estate assets in a divorce . . .
Prepare Before Filing
It’s crucial to remember that during a divorce settlement, everything is subject to division, including assets, debts, and property. To protect what you’re entitled to, it’s wise to take proactive steps before filing for divorce. This includes gathering important documentation and evidence that will support your claims in court, whether it’s financial records, property titles, or other valuable assets. By being organized and prepared, you can ensure that you’re in the best possible position to negotiate a fair settlement. Taking these measures early can help you safeguard your interests and ensure that you’re not left with less than you deserve when it comes time to divide the marital estate.
Inventory Non-Marital Assets
Taking the time to compile a thorough list of all property you acquired before the marriage is essential for protecting your interests during a divorce. This means gathering all supporting documentation and evidence, such as real estate records, bank statements, and any contracts or deeds that verify ownership of assets obtained prior to the marriage. By being proactive and assembling this information before your spouse initiates the divorce proceedings, you ensure that you have a clear and irrefutable record of what belongs to you. This can help safeguard your separate property and prevent any potential disputes over ownership, giving you a stronger position in the division of assets.
Get an Accurate Valuation of Your Real Estate Assets
“Most people tend to forget the implication of tax on investment, such as deferred tax payment on retirement accounts. An early withdrawal could also come with a penalty.” It’s important to factor these considerations into your overall financial picture when appraising the value of property and investments, especially during a divorce. For instance, while retirement accounts like 401(k)s may seem like a significant asset, the deferred taxes and potential penalties for early withdrawals can drastically reduce their actual value. Understanding the tax consequences of liquidating certain assets—whether it’s retirement savings, stocks, or real estate—ensures you get a more accurate assessment of what you are entitled to. Taking these factors into account can help you avoid unpleasant surprises and make more informed decisions when dividing your assets.
Choose Battles Wisely
The simple fact is that not everything is worth fighting for, especially when you consider the high costs of attorneys. While certain assets may hold sentimental value or seem essential to fight for, it’s important to realistically assess their worth compared to the legal expenses involved. Before pursuing a petition for a specific asset, carefully weigh its value against the potential attorney fees, court costs, and the time it may take to resolve the dispute. Sometimes, the financial and emotional toll of a prolonged legal battle can far outweigh the benefit of winning a particular asset. By taking a step back and evaluating the situation pragmatically, you can avoid unnecessary conflict and focus on reaching a fair, practical resolution.
Consider Getting a Mediator
Divorces are undeniably expensive, and the outcomes often don’t align with your ideal expectations. The cost of attorney fees can quickly add up, especially if the process becomes drawn-out or contentious. One way to mitigate these costs and potentially reach a more amicable resolution is by using a mediator. A mediator can facilitate open communication between both parties, helping to work through disagreements and find mutually acceptable solutions. This approach is far less expensive than traditional legal battles, as it eliminates the need for lengthy court proceedings and reduces the time spent on attorney consultations. Additionally, mediation can create a more cooperative atmosphere, allowing both parties to feel heard and respected, which can ultimately lead to a quicker and more satisfactory divorce settlement.
2. Implement These Tactics
There are three major things you can do to protect your real estate assets when going through a divorce. They are . . .
Use Equity to Your Advantage
One effective way to protect your South Carolina real estate assets is by maintaining negative equity.
“You can protect the real estate assets you have control over and have purchased individually by maximizing on its equity. Equity often determines the real value of a property. By subtracting any loans secured with the property from the property’s market value, divorce attorneys are able to determine the amount that should be split between the divorcing parties. Maintaining negative equity is the best bet at protecting your assets.”
Prove Assets Are Premarital
Assets in a marriage are generally considered part of the marital estate unless you can prove they are non-marital assets. “For real estate acquired before the marriage, you need to prove that any loans associated with the asset were cleared before you got into the marriage.” If you fail to provide this proof, the court may determine that “the asset has only partial non-marital value,” meaning that while part of the property may be excluded from division, the portion linked to the mortgage or debt accumulated during the marriage could still be considered marital property. It’s crucial to gather supporting documentation, such as loan statements and records showing when the debts were paid off, to ensure that you protect your non-marital assets and prevent any portion of them from being divided in the divorce.
Consider Setting up a Land Trust
Any real estate assets you acquired before the marriage can be put into a land trust. This will protect the assets from creditors and litigators, and it “can protect you from losing your property during divorce.”
Here’s how it works . . .
“A land trust offers protection by maintaining your privacy with regards to ownership of real estate. The land trust will be the legal owner of the estate, and your name will not appear in any public records that identify property ownership. Only the trust name will exist.”
3. The Process of Selling Real Estate Assets in a Divorce
Sometimes in a divorce, both parties agree to sell the property and then split the proceeds. In this case, there are several steps you should take to ensure your portion of the real estate assets is protected. First, make sure that any outstanding mortgage or liens on the property are addressed and agreed upon, so you’re not left with unexpected liabilities after the sale. You should also get a fair market value assessment of the property to ensure that you’re receiving your rightful share of the proceeds. Additionally, it’s wise to have clear agreements in writing regarding the distribution of the sale profits, taking into account any repairs or costs incurred during the process. By taking these precautions, you can avoid future disputes and ensure a smoother financial transition post-divorce.
Set an Asking Price
Pricing appropriately for a sale and in line with market value is critical for selling real estate. That’s why it’s highly recommended that you work closely with a local agent who knows the local market well. To consult a South Carolina agent about pricing, just call (843) 410-3050.
Prepare for Showings
“Getting the house ready can be the most difficult part of the sale process. There’s often some work that needs to be done – minor repairs, painting, and the like – before the house is ready to be shown, so you need to agree on where the money for that will come from. If both of you have moved out by the time you put the house on the market, you can leave the place to be staged by the agent.”
Review Offers
When offers from potential buyers begin to come in, you’ll have to work together to review them. The problem that arises in a divorce is that people typically just want to get it over with as soon as possible and, as a result, often accept a less than desirable offer. “So, again, be sure to lean on your agent’s expertise when reviewing offers.” Your real estate agent can help you assess each offer objectively, considering not only the price but also the terms and contingencies attached. They can provide valuable insight into whether an offer is in line with the market or if there’s room for negotiation. Taking the time to carefully evaluate all offers will ensure that neither party sacrifices value in the rush to finalize the sale, and that the final agreement is fair and beneficial for both sides.
Divide the Proceeds
The last step in the process will be dividing the proceeds of the sale. “In general, that shouldn’t be too complex – the escrow company can distribute the money, after paying off all the obligations on the house and making whatever other payments you’ve agreed to.”
Usually, the only difficulty that arises here is when “one spouse has been making post-separation mortgage payments, that spouse has probably been reducing the principle amount and increasing the equity, which may increase the amount to be divided between the spouses after the closing costs and obligations have been paid. The distribution should be adjusted to account for the paying spouse’s contribution.”
An Important Aspect of Protecting Real Estate Assets
If you and your spouse/ex-spouse decide to sell property, you’ll likely come out far ahead by working with an experienced South Carolina investor. They will have knowledge of the local market and will be able to keep a cool head in order to get you the best deal possible. If your goal is to protect your South Carolina real estate assets when going through a divorce, be sure to contact us today at (843) 410-3050.