--- title: Our Blog - AMF Divorce | Real Estate description: Real Estate | From mortgage professionals to therapists to attorneys, the team at A.M. Financial works closely with these types of professionals. --- ## A.M. Financial - [Services](https://amf-divorce.com/divorce-transition-services) - [Service Plan](https://amf-divorce.com/service-plan) - [Frequently Asked Questions](https://amf-divorce.com/frequently-asked-questions) - [Our Blog](https://amf-divorce.com/our-blog) - [About Amy](https://amf-divorce.com/about-amy) - [Contact Us](https://amf-divorce.com/contact-us) - [Services](https://amf-divorce.com/divorce-transition-services) - [Services](https://amf-divorce.com/divorce-transition-services) - [Service Plan](https://amf-divorce.com/service-plan) - [Frequently Asked Questions](https://amf-divorce.com/frequently-asked-questions) - [Our Blog](https://amf-divorce.com/our-blog) - [About Amy](https://amf-divorce.com/about-amy) - [Contact Us](https://amf-divorce.com/contact-us) [Book a Meeting](https://calendly.com/amymahlenmelander/consultdivorcefinancialplanning) Posts about # Real Estate ## [Keeping the Marital Home? Interest Rates Aren’t the Only Challenge](https://amf-divorce.com/our-blog/keeping-the-marital-home-interest-rates-arent-the-only-challenge) June 03, 2024 Divorce is a challenging process, and one of the most significant decisions couples face is whether to keep the marital home. While rising interest rates are a major consideration, they are not the... [CONTINUE READING](https://amf-divorce.com/our-blog/keeping-the-marital-home-interest-rates-arent-the-only-challenge) ## [What is a Loan Assumption?](https://amf-divorce.com/our-blog/what-is-a-loan-assumption) August 01, 2023 Deciding the fate of [marital property](https://amf-divorce.com/our-blog/separate-vs-marital-property) is a crucial aspect of any divorce settlement. The process often involves intense emotions and complex financial considerations, making it all the more... [CONTINUE READING](https://amf-divorce.com/our-blog/what-is-a-loan-assumption) ## [Buying a Home in the Midst of a Divorce](https://amf-divorce.com/our-blog/buying-a-home-in-the-midst-of-a-divorce) April 24, 2023 Managing living arrangements during a divorce is tough and is typically the first item on the to-do-list as a divorce moves forward.  **Determining who is going to keep the house, where someone is...** [CONTINUE READING](https://amf-divorce.com/our-blog/buying-a-home-in-the-midst-of-a-divorce) ## [Converting Rental Property to a Primary Residence: Property Division in Divorce, Part 4](https://amf-divorce.com/our-blog/converting-rental-property-to-a-primary-residence-property-division-in-divorce-part-4) March 05, 2023 When dividing assets in divorce most people, individuals, mediators and attorneys alike, tend to focus on the property division spreadsheet. Current values of assets are listed along with... [CONTINUE READING](https://amf-divorce.com/our-blog/converting-rental-property-to-a-primary-residence-property-division-in-divorce-part-4) ## [Property Division Values, Part 3: Home Equity](https://amf-divorce.com/our-blog/property-division-values-part-3-home-equity) January 13, 2023 When dividing assets in divorce individuals, mediators and attorneys alike, tend to focus on the property division spreadsheet. The current values of asset and debt balances determined to be... [CONTINUE READING](https://amf-divorce.com/our-blog/property-division-values-part-3-home-equity) ## [Property Division Values, Part 1: Retirement Accounts](https://amf-divorce.com/our-blog/property-division-values-part-1-retirement-accounts) June 01, 2022 When dividing assets in divorce most people, individuals, mediators and attorneys alike, tend to focus on the property division spreadsheet. Current values of assets are listed along with... [CONTINUE READING](https://amf-divorce.com/our-blog/property-division-values-part-1-retirement-accounts) ## [Property Division Values, Part 2: Non-Retirement Assets](https://amf-divorce.com/our-blog/property-division-values-part-2-non-retirement-assets) June 01, 2022 When dividing assets in divorce most people, individuals, mediators and attorneys alike, tend to focus on the property division spreadsheet. Current values of assets are listed along with... [CONTINUE READING](https://amf-divorce.com/our-blog/property-division-values-part-2-non-retirement-assets) ##### About Amy With compassion and patience, Amy focuses on her client’s unique priorities to build a financial road map that provides clarity to make informed decisions today regarding the future. ##### Links - [Home](https://amf-divorce.com) - [Services](https://amf-divorce.com/divorce-transition-services) - [Our Blog](https://amf-divorce.com/our-blog) - [About Amy](https://amf-divorce.com/about-amy) - [Contact Us](https://amf-divorce.com/contact-us) - [Schedule a Meeting](https://calendly.com/amymahlenmelander) ©2026 Copyright. All rights reserved. A.M. Financial provides supporting financial information, evaluation and analysis to be utilized by the client and the client’s selected attorney if directed, during the process of their divorce. ervices provided in regards to this agreement are solely fee-only and do not involve investment or security advice or insurance transactions. All information is financial in nature and should not be construed or relied upon as legal or tax advice. A.M. Financial IS NOT AN ATTORNEY AND DOES NOT PROVIDE LEGAL OR TAX ADVICE. Individuals are encouraged to seek competent legal and tax advice from professionals who specialize in divorce and tax laws in their respective state. Amy Melander (CRD #4692263) is an Investment Adviser Representative of OneDigital Investment Advisors, LLC (ODIA). ODIA and A.M. Financial are independent and unaffiliated entities. ODIA does not offer or provide divorce financial planning services and any statements and/or opinions expressed by A.M. Financial do not represent the views and/or opinions of ODIA.   This website is a publication of A.M. Financial. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Content should not be viewed as personalized investment advice or as an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein. A professional adviser should be consulted before implementing any of the strategies presented. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. ```json { "@context" : "http://schema.org", "@type" : "BlogPosting", "articleBody" : "Divorce is a challenging process, and one of the most significant decisions couples face is whether to keep the marital home. While rising interest rates are a major consideration, they are not the only financial hurdle. Here are some critical points to consider if you’re contemplating keeping the marital home in the wake of a divorce. Skyrocketing Real Estate Assessments In recent years, real estate assessments in Colorado (and nationwide) have surged, leading to increased property values and therefore property taxes. If you plan to keep the marital home, be prepared for higher mortgage payments due to these increased assessments. This can significantly impact your monthly budget. Rising Homeowner’s insurance costs Homeowners insurance premiums have also seen a significant rise, keeping pace with higher home values and increased labor and construction costs for repairs. Evaluate whether your budget can accommodate these rising costs, as they are necessary for protecting your investment. After-Tax Mortgage Costs When weighing the decision on whether to keep or sell the marital home or not, work with a financial professional to understand the after-tax cost of your mortgage. Consider the capital gains taxes associated with selling the home, which could affect your long-term financial planning. While you’d be left with higher interest rates if you have to refinance the marital home into your own name, those might be partially offset by tax deductions on mortgage interest. A tax advisor can help you understand these tradeoffs fully. The Need for Bigger Budgets Given higher interest rates, taxes, insurance, and the financial strain of divorce, you must have a substantial margin in your budget to consider keeping your marital home. Affordability on a single income is a key factor in this decision, as your payments might not be sustainable alone in this environment of higher property values. Therefore, future budget planning is essential. Understanding your goals and priorities now will help you advocate for divorce agreements that meet your future needs. Planning allows you to make informed decisions and avoid potential financial pitfalls. Evaluate whether maintaining the house aligns with your financial and retirement goals. Sometimes, selling the home and opting for more liquid assets that appreciate faster might be a better financial strategy. It’s also important to budget for future increases in taxes and insurance. Leave enough money in your savings account to cover home maintenance and unexpected repairs. These factors can prevent financial strain down the line. If you do want to stay in the marital home and you are over the age of 62, consider a Home Equity Conversion Mortgage (formally known as reverse mortgage). This could help keep you in your home or can even help you purchase a new home, either with no mortgage (principal & interest) payments. Lastly, while financial factors are paramount, it’s also important to consider the emotional and practical benefits of staying in the marital home. Moving can be stressful and disruptive, especially for children. Remaining in the same school district and community can provide much-needed stability during a tumultuous time, helping everyone adjust better to the changes brought by divorce. Deciding whether to keep the marital home involves weighing multiple financial, practical, and emotional factors. It’s a complex decision that requires careful consideration and planning. Consulting with a financial planner can help you navigate these challenges and make the best decision for your future.", "author" : { "@type" : "Person", "name" : "Amy Mahlen", "sameAs" : "", "url" : "https://amf-divorce.com/our-blog/author/amy-mahlen" }, "dateModified" : "03/06/2024", "datePublished" : "03/06/2024", "headline" : "Keeping the Marital Home? Interest Rates Aren’t the Only Challenge", "image" : { "@type" : "ImageObject", "height" : 400, "url" : "https://39875594.fs1.hubspotusercontent-na1.net/hubfs/39875594/Imported_Blog_Media/qtq80-3eyRS4-1536x1024.jpeg", "width" : 750 }, "mainEntityOfPage" : "https://amf-divorce.com/our-blog/keeping-the-marital-home-interest-rates-arent-the-only-challenge", "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "" }, "name" : "A.M. Financial", "url" : "amf-divorce.com" } } ``` ```json { "@context" : "http://schema.org", "@type" : "BlogPosting", "articleBody" : "Deciding the fate of marital property is a crucial aspect of any divorce settlement. The process often involves intense emotions and complex financial considerations, making it all the more challenging. One common alternative couples are considering to handle the marital home that has gained popularity in today’s unique market conditions: loan assumption. The recent increase in both interest rates and home prices has added additional pressure on homeowners navigating divorce, limiting their available options. As a result, many individuals are actively seeking creative and practical alternatives. In this blog post, we explore the nuts and bolts of loan assumptions to help you make an informed financial decision that aligns with both your financial goals and your unique divorce circumstances. What is a Loan Assumption? In addition to significant increases in housing costs that we have seen since the pandemic,, coupled with the reality of doubling housing costs for a divorcing couple, many couples are evaluating loan assumptions to minimize overall housing expenses. This option provides an opportunity to maintain current, affordable housing costs, retain homeownership, and/or to provide stability for children. Is a Divorce in Your Future? Get Prepared with These Essential Tips. A qualified loan assumption is when one party of a joint debt, such as a shared mortgage, qualifies to retain and retitle the original loan into their name, solely. This essentially releases the other debtor (typically a former spouse or domestic partner) from the mortgage payments and debt obligation. Many homeowners are looking to explore this option in a divorce under the assumption that the individual retaining the loan will be able to keep the original loan terms, where they hope to keep previous low mortgage rates and their associated lower, current mortgage payments. Clients in the Colorado area are looking into loan assumptions to determine if they are an option as they go through their divorce. Oftentimes, bank representatives may even confirm the availability of a loan assumption. However, according to the Certified Divorce Lending Association, loan assumption options may not always meet client expectations post-divorce. It’s important to work with a Certified Divorce Lending Professional (CDLP) or mortgage planning assistance to determine which mortgage path is best for you during your divorce and to determine what information you can rely on to make decisions in your divorce that remain reliable post-divorce for agreements to be carried out. Keep these important considerations in mind as you evaluate a loan assumption in you divorce: Not All Institutions Offer Loan Assumptions A CDLP can help you review your loan documents to determine if your current institution offers loan assumptions. Sometimes calling your loan provider and inquiring can be misleading (see bullet point 5 below). Some Types of Loans Are More Likely to Provide Loan Assumption Government mortgage loans such as FHA, VA, and USDA loans often offer loan assumption programs. When it comes to VA loans, if the individual assuming a VA loan is not a veteran, the veteran will forgo their VA entitlement as long as the VA loan assumed is operating until it is paid in full. This limits a veteran’s ability to obtain another VA loan on a future property. Conventional loans may offer loan assumption programs, but are not required. Actual Loan Assumption Terms May Not Reflect Original Terms While institutions may offer loan assumption, they are not required to provide a loan assumption with the original loan terms, such as the original low interest rate. They can sometimes offer a loan assumption with higher rates or any other terms their current procedures deem necessary at the time. No Cash/Equity Buy-Out Absolutely no cash can be taken out during a loan assumption. Therefore, if the spouse who is not retaining the home requires an equity cash payment in order to produce an equitable and agreeable division of asset terms, a loan assumption can not be used to meet those needs. Mortgage Sales Practices Can Be Misleading Mortgage sales is a practice and financial institutions do their best to keep their current customers’ business. Be aware of bait and switch behaviors where mortgage professionals offer you one thing and, after further inquiry or qualification processes, offer you something different then expected, with higher rates then the original loan, a traditional refinance loan, or possibly no offering at all. Once again, working with a Certified Divorce Lending Professional for mortgage planning assistance can help protect you from these practices and provide reliable post-divorce information. Is Assuming a Loan Best for You? Even armed with this information, decisions around a loan assumption can be challenging. As you consider whether this is the right financial path in your divorce, keep the following in mind: While you do normally save on fees in a loan assumption (as compared to a refinance), you lose the option of re-amortizing your loan over a new 30-years. The latter approach could result in lower payments and provide you with more cash flow as you transition into new financial responsibilities on your own. Modeling the option of loan assumption against refinancing with different teams and current interest rates is important. Find a Certified Divorce Lending Professional to help you align your lending strategy to your long-term financial goals. While a loan assumption doesn’t require a full refinance, you do have to qualify for the payments on your own. This includes an evaluation of your income, assets, credit scores, and more. Typically, loan assumptions are a more affordable option than a refinance, because there are fewer fees, no appraisals needed, no application fees, and no fees paid to title/insurance companies. Consider the timing of your divorce alongside the timing of this decision. More traditional refinances typically take 30 days and loan assumptions can take 3-6 months. During this time, interest rates can also change, which could impact your strategy. Deciding the fate of marital property in divorce is a complex and emotionally charged process. However, amidst the challenges, loan assumptions have emerged as a popular alternative to refinancing or selling the marital home in today's unique market conditions. By staying informed and seeking professional guidance, you can navigate the complexities of divorce and make sound financial choices for a stable future. At A.M. Financial, we can help model various approaches and show you how they will impact your budget, cash flow, and long-term goals. Contact us to learn more about how we can support your evaluation of a loan assumption or other financial aspects of your divorce in a free consultation.", "author" : { "@type" : "Person", "name" : "Amy Mahlen", "sameAs" : "", "url" : "https://amf-divorce.com/our-blog/author/amy-mahlen" }, "dateModified" : "01/08/2023", "datePublished" : "01/08/2023", "headline" : "What is a Loan Assumption?", "image" : { "@type" : "ImageObject", "height" : 400, "url" : "https://cdn2.hubspot.net/hubfs/39875594/Imported_Blog_Media/qtq80-9SCbQC-2048x1365-1.jpeg", "width" : 750 }, "mainEntityOfPage" : "https://amf-divorce.com/our-blog/what-is-a-loan-assumption", "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "" }, "name" : "A.M. Financial", "url" : "amf-divorce.com" } } ``` ```json { "@context" : "http://schema.org", "@type" : "BlogPosting", "articleBody" : "Managing living arrangements during a divorce is tough and is typically the first item on the to-do-list as a divorce moves forward. Determining who is going to keep the house, where someone is going to live and where the money is going to come from are heightened points of contention among spouses. To minimize stress, conflict and provide a healthy atmosphere for children, it is imperative to solve this issue quickly. Various living arrangement options exist such as renting or living with family or friends for a temporary period. However, many individuals do not want to burden friends and families, feel as though they are throwing away money renting in a surging real estate market, which in turn leaves many soon-to-be-divorcees with one option – purchasing a new residence. Before searching the internet and talking with your best friend’s sister who is a real estate agent, read through these tips to save yourself some much needed energy and time: Have Divorce Papers Been Filed? If a divorce petition has been filed to start the process, the relationship status on a mortgage application must be listed as ‘separated’ and not married regardless of if you still reside together in the marital home. Therefore, your spouse’s income will not be included or taken into consideration. In cases where one spouse does not have enough working income to qualify for a mortgage this can present a problem in the home purchasing process as the higher earning spouse’s income will not be involved. A written separation agreement outlining the amount and terms of spousal and child support will be required for loan purposes. Completing an application as married instead of separated when divorce papers have been filed can put yourself at significant risk of having your loan fall through and prove to be a waste time and energy when it could have been utilized more effectively elsewhere. What is Your Income for Mortgage Purposes? Earned income from employment qualifies depending on how long you have been employed. If you have been unemployed for several years while taking care of children at home and recently gained employment it is important to speak with a Certified Divorce Mortgage Lender to determine the length of employment required for loan purposes. For spousal and child support to qualify as income, the receiving spouse must receive payments for 6-months before income can be considered. Often times support payments don’t begin until shortly after a divorce is finalized therefore the divorce timeline itself is an additional waiting period to get through before the 6-months of receipt can be accomplished. After which time an additional minimum of 3 years of future support payments are required to qualify as income. That translates into a bare minimum of at least 3.5 years of support required at the time a separation agreement is written (time periods can vary depending on the type of loan such as FHA, VA, Conventional or Jumbo – make sure to inquire and plan accordingly). Support payments are considered debt obligations and funnel into an individual’s debt-to-income ratios. Emotions & Future Financial Plans Emotion and stress levels are at extreme levels during this time. Individuals look for a quick fix and overlook long-term considerations during the decision-making process. Owning a home involves more then just a mortgage payment; there are significant maintenance costs such as painting, new roofs, landscaping, lawn services, snow removal and replacing all those pesky items that seem to constantly need attention. Rising home values are pushing real estate taxes higher and thus insurance costs year-by-year as the Denver metro area is expanding rapidly. Furnishing a home can drain bank accounts and or push higher debt levels. Re-entering the workforce can create additional expenses like transportation, wardrobe, eating out, daycare, etc. Children grow up and have cells phones, drive cars that need to be insured and may become involved in more costly activities. Inflation Time will move forward, and just like any budget expenditures move upward unless an individual is proactively chopping costs. Even if support is awarded for what is considered a long-period of time (7+ years) most do not increase for rising expenses. Inflation of 3% per year causes living expenses to rise 23% cumulatively over 7 years and 34% in 10 years. For example, a support award of $2,000/month (after-tax) in today’s dollars would only be worth $1,540 in 7 years or $1,320 in 10 years – a huge difference! It is imperative to leave ample room in your budget to achieve long-term financial stability and independence especially with financial commitments such as a mortgage. Conclusion The best financial advice during this living transition is patience or temporary living arrangements until permanent details are settled upon (if there is any form of abuse, safety should be of utmost and primary concern). Qualifying for a mortgage in-and-of-itself does not determine if you can or should purchase a home. Trying to purchase a home without having agreed upon future income or obligations in the form of spousal and/or child support could be financially reckless. Divorce proceedings often turn and twist, changing direction and expectations on a whim. Financial education and planning regarding your complete financial future during this process is imperative to establish a strong financial foundation for your tomorrow. Let’s build a divorce financial strategy that works best for your future! You wouldn’t retire without a financial plan… it might be messy… Don’t divorce without one either! Get the information you need to get started here, or Click here to schedule a free initial consultation with Amy", "author" : { "@type" : "Person", "name" : "max.melomed@gmail.com", "sameAs" : "", "url" : "https://amf-divorce.com/our-blog/author/max-melomedgmail-com" }, "dateModified" : "24/04/2023", "datePublished" : "24/04/2023", "headline" : "Buying a Home in the Midst of a Divorce", "image" : { "@type" : "ImageObject", "height" : 400, "url" : "https://cdn2.hubspot.net/hubfs/39875594/Imported_Blog_Media/e261dd_61276f7d836046589a583ccf601037c3~mv2.webp", "width" : 750 }, "mainEntityOfPage" : "https://amf-divorce.com/our-blog/buying-a-home-in-the-midst-of-a-divorce", "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "" }, "name" : "A.M. Financial", "url" : "amf-divorce.com" } } ``` ```json { "@context" : "http://schema.org", "@type" : "BlogPosting", "articleBody" : "When dividing assets in divorce most people, individuals, mediators and attorneys alike, tend to focus on the property division spreadsheet. Current values of assets are listed along with outstanding debt balances that are deemed to be marital. Typically, above all else, the focus and end goal is to split property 50-50. With so much emphasis on this spreadsheet that dictates the remainder of your financial future, is there anything missing that could dramatically change your post-divorce expectations? One of the first initial complications of divorce is altering living arrangements. Planning for this change usually creates strain on the budget and tension within how the family will operate in two homes. Divorce proceedings may have already began or the process is nearing which creates more stress and demands. Moving into a rental property that the couple owns may seem like an easy answer for solving these overwhelming living arrangement issues. However, converting rental property to a primary residence can cause significant tax complications down the road that weren’t anticipated or discussed during a dissolution of marriage. Be cautious of what might be missing! Capital Gains Tax Capital gains are assessed when a property is sold, whether the property is real property, a personal residence or combination as discussed in the previous article in this series, Property Division in Divorce Part 3: Home Equity (click here to read). Individuals or couples that have owned and been living in the home for two out of the last five years can offset gains by utilizing the primary home exclusion of up to $250,000 for individuals or $500,000 for married filing joint couples. However, The Housing Assistance Tax Act of 2008 has complicated the exclusion for property that has been used as both a primary residence and a rental property. In cases where the property has been rented out after 2009, not all of the gains associated with the property can be offset with the above exclusions even if the ownership and living requirements have been met. With the tremendous real estate growth that has been experienced in the Denver market this past decade, it is imperative to understand how much of the capital gains can be sheltered with the primary residence exclusion and if there are any amounts that will be exempt. Depreciation Recapture If the property has at anytime been rented to tenets, most likely depreciation occured. Owners depreciate assets such as rental property because it will lower income taxes and help offset rental income. Depreciation can not be offset by a primary residence capital gain exclusion which was discussed above. Therefore, any amount depreciated while holding the property will be subject to 25% depreciation recapture tax. Conclusion Making the decision of moving into a rental property that you own can be more complex then what it may seem on the surface with unique tax issues involved. The value of these properties on the property division spreadsheet may not always be of the same value down the road after taxes have been evaluated. Be sure to consider all the financial components of your divorce transition; how they affect your priorities and long-term financial situation. Financial education, analysis and proper planning before signing the final papers is more important than ever to build a strong foundation for the next chapter in life. Let’s build a property division strategy that works best for your future! You wouldn’t retire without a financial plan… it might be messy! Don’t divorce without one either! Get the information you need to get started here, or Click here to schedule a free initial consultation with Amy", "author" : { "@type" : "Person", "name" : "max.melomed@gmail.com", "sameAs" : "", "url" : "https://amf-divorce.com/our-blog/author/max-melomedgmail-com" }, "dateModified" : "05/03/2023", "datePublished" : "05/03/2023", "headline" : "Converting Rental Property to a Primary Residence: Property Division in Divorce, Part 4", "image" : { "@type" : "ImageObject", "height" : 400, "url" : "https://cdn2.hubspot.net/hubfs/39875594/Imported_Blog_Media/c38cd71759f744e1a7ec2d10871410da.webp", "width" : 750 }, "mainEntityOfPage" : "https://amf-divorce.com/our-blog/converting-rental-property-to-a-primary-residence-property-division-in-divorce-part-4", "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "" }, "name" : "A.M. Financial", "url" : "amf-divorce.com" } } ``` ```json { "@context" : "http://schema.org", "@type" : "BlogPosting", "articleBody" : "When dividing assets in divorce individuals, mediators and attorneys alike, tend to focus on the property division spreadsheet. The current values of asset and debt balances determined to be marital are outlined. Typically, above all else, the focus and end goal is to split property 50-50. With so much emphasis on this spreadsheet that dictates the remainder of your financial future, is there anything missing that could dramatically change your post-divorce experience? In most divorces, the largest asset involved tends to be the home and therefore carries a plethora of questions regarding equity and living arrangements moving forward. The bulk of planning efforts focus on basic budgeting and are driven from an emotional perspective of either an intense feeling of wanting to keep the home, run from it or utter confusion. Regardless of whether you wish to stay in the home or establish a new living space by renting or purchasing a new home, it would be remiss to rely solely on the real estate value listed on the property division worksheet, basic budgeting applications and not consider the following: Part 3: Home Equity and Future Living Arrangements Capital Gains Tax Capital gains taxes are assessed when a home is sold. Therefore, when one partner refinances and stays in the home, future taxes are overlooked during the divorce process as all eyes are focused on the equity numbers listed on property division worksheet. When the home is sold post-divorce an exclusion is available for up to $500,000 for married couples or $250,000 for individuals as long as the home has been owned and used as a primary residence for two out of the last five years. The equity growth and potential capital gains tax involved, especially for longer marriages, can be significant down the road if a spouse stays in the home and can only utilize the lower individual exclusion. For example, if Anne wishes to stay in the home where she raised her kids for the passed 18 years that was purchased for $150,000 and is now worth $750,000, upon sale of the home (assuming no additional growth in value) she would experience a $600,000 gain. If she refinanced the home into her sole name and remains unmarried, Anne would qualify for a $250,000 exclusion leaving her with a taxable gain of $350,000. Capital gains are most often taxed at a rate of 15% which would amount to an additional tax bill of $52,500 when the home is sold – a large financial burden to deal with for an individual! Keep in mind that if there is additional equity growth in the home, the tax will be even larger. Mortgage Lending Requirements Many couples finalize their divorce without integrating mortgage lending requirements into their settlement which can close doors for intended plans post-divorce. Debt to income and loan to value ratios are directly affected by equity payout agreements and support payments that are nearly impossible to change for mortgage lending purposes after a divorce has been finalized. To qualify as income, spousal and child support payments must meet specific time guidelines. These issues don’t affect the property division worksheet directly, however, post-divorce changes affect the financial strategy within the property division worksheet. Read Part 1: Retirement Accounts and Part 2: Non-Retirement Accounts in this series for more information and examples. On-Going Maintenance and Taxes Regardless of if you are planning on staying in your home or purchasing a new home, a home inspection is recommended. This report provides a full picture of the condition of the home, outlining serious issues that might require substantial financial outlays as well as other problems that should be addressed causing a financial impact down the road. As real estate values continue to climb, property taxes continue to rise. If you are looking for long-term living arrangements post-divorce it is important to leave a large enough margin in your budget to adjust for possible tax increases and home maintenance whether it is expected and listed on an inspection report or an unforeseen emergency – don’t overlook the importance of an emergency fund and how to manage replenishing it. Conclusion Establishing living arrangements for moving forward is complex and requires more analysis and planning then exclusively relying on a 50-50 division of property concept. Be sure to evaluate all the financial components of your divorce transition; how they affect your priorities and long-term financial situation. Financial education, analysis and proper planning before signing the final papers is more important than ever to build a strong foundation for the next chapter in life. Let’s build a property division strategy that works best for you and your future! You wouldn’t retire without a financial plan… it might be messy! Don’t divorce without one either! Get the information you need to get started here, or Click here to schedule a free initial consultation with Amy", "author" : { "@type" : "Person", "name" : "max.melomed@gmail.com", "sameAs" : "", "url" : "https://amf-divorce.com/our-blog/author/max-melomedgmail-com" }, "dateModified" : "13/01/2023", "datePublished" : "13/01/2023", "headline" : "Property Division Values, Part 3: Home Equity", "image" : { "@type" : "ImageObject", "height" : 400, "url" : "https://cdn2.hubspot.net/hubfs/39875594/Imported_Blog_Media/a6bd209816b54d1eca7231d293d682f7.webp", "width" : 750 }, "mainEntityOfPage" : "https://amf-divorce.com/our-blog/property-division-values-part-3-home-equity", "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "" }, "name" : "A.M. Financial", "url" : "amf-divorce.com" } } ``` ```json { "@context" : "http://schema.org", "@type" : "BlogPosting", "articleBody" : "When dividing assets in divorce most people, individuals, mediators and attorneys alike, tend to focus on the property division spreadsheet. Current values of assets are listed along with outstanding debt balances that are deemed to be marital. Typically, above all else, the focus and end goal is to split property 50-50. With so much emphasis on this spreadsheet that dictates the remainder of your financial future, is there anything missing that could dramatically skew the end results? The old cliché of ‘nothing is certain in life except death and taxes’ rings loud and true in divorce, don’t ignore them. As it applies to the property division worksheet, are taxes being considered? How can evaluating taxes dramatically change the actual results down the road? In this series, retirement accounts, non-retirement investments, home equity and rental property will be discussed. Part 1 – Retirement Accounts The reason most people sock money away in a retirement account is because it offers tax benefits. Most of the time, the statement value is not the amount the individual receives because the value is before-tax. If retirement assets are being used to offset home equity division or if there are current cash needs from retirement accounts that will trigger taxes, the after-tax values should be considered. Consider chopping 15%-39% plus an additional 10% early withdrawal penalty away from the current value listed, and now it may only be worth a fraction of what appears on the spreadsheet. Be sure to pay attention to Roth IRAs and Roth 401ks. These accounts are a ‘horse of a different color’ in the retirement category because contributions are made on an after-tax basis. If Roth assets are withdrawn after the age of 59 ½, the earnings are completely tax-free! During retirement the value of a Roth does not go on Uncle Sam’s chopping block versus other retirement assets that are 100% taxable. The earning potential of a Roth is also considerably more powerful because of this difference as well. For example, if husband kept an $100,000 IRA and wife retained her $100,000 Roth IRA today, 10 years down the road during their retirement with no additional contributions, the accounts would each be worth $200,000 with a 7.2% annual return. However, if the husband were to distribute his $200,000 he would have $140,000 (assuming he was in the 25% tax bracket plus state taxes) whereas the wife could distribute her Roth account and still have $200,000 – a big difference! Roth IRAs have more convenient features – any contributions made to a Roth IRA can be withdrawn at any time tax-free and penalty-free! Therefore, if someone has current cash needs the actual value of a Roth IRA would be significantly more to them individually. Conclusion Overall, the current values listed on the property division worksheet are not useful when applied to individual circumstances and priorities moving forward. In some cases, short term cash needs are more important versus long term retirement savings/income for others. The real value of the property division and the actual end results has more to do with your priorities then it does relying on a 50-50 split. Let’s build a property division strategy that works best for you and your future! You wouldn’t retire without a financial plan… it might be messy! Don’t divorce without one either! Get the information you need to get started here, or Click here to schedule a free initial consultation with Amy", "author" : { "@type" : "Person", "name" : "max.melomed@gmail.com", "sameAs" : "", "url" : "https://amf-divorce.com/our-blog/author/max-melomedgmail-com" }, "dateModified" : "01/06/2022", "datePublished" : "01/06/2022", "headline" : "Property Division Values, Part 1: Retirement Accounts", "image" : { "@type" : "ImageObject", "height" : 400, "url" : "https://cdn2.hubspot.net/hubfs/39875594/Imported_Blog_Media/e261dd_6d7ba347aa384b24a41dfc721cad00c3~mv2.webp", "width" : 750 }, "mainEntityOfPage" : "https://amf-divorce.com/our-blog/property-division-values-part-1-retirement-accounts", "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "" }, "name" : "A.M. Financial", "url" : "amf-divorce.com" } } ``` ```json { "@context" : "http://schema.org", "@type" : "BlogPosting", "articleBody" : "When dividing assets in divorce most people, individuals, mediators and attorneys alike, tend to focus on the property division spreadsheet. Current values of assets are listed along with outstanding debt balances that are deemed to be marital. Typically, above all else, the focus and end goal is to split property 50-50. With so much emphasis on this spreadsheet that dictates the remainder of your financial future, is there anything missing that could dramatically skew the end results? Ignoring the financial components of a divorce settlement and the effect on your future is similar to playing slot machines in Vegas – hope to win, but there is a chance you will leave with a lot less than you came with and anticipated losing. In the first part of this series, retirement account valuation blunders were addressed when utilizing a 50-50 division approach. Here, we will examine non-retirement investments and what factors can alter the outcome down the road. Home equity and rental property will be outlined in upcoming posts. Part 2: Non-Retirement Investments Investments outside of the retirement category vary widely from checking accounts, certificates of deposits (CD), brokerage or mutual fund accounts, land, rental property, commodities such as gold, fine art, antique car collections, business ownership, etc. Are they all created equal? Or are they apples and oranges? Each asset previously listed is unique. The growth potential and place in an overall investment strategy differs drastically. Although these investments are not tax sheltered like retirement accounts, they are still subject to taxes in a different manner. When utilizing a 50-50 division of property approach during settlement, is awarding a $100,000 CD to Anna and $100,000 worth of Amazon stock to John realistic to rely upon for post-divorce results? Shortly after finalization, John sold the Amazon stock and used the proceeds to purchase a new home. The following April, he had an additional $12,000 tax bill because the stock was purchased 10 years prior for $20,000, so he realized a $80,000 capital gain that created a $12,000 tax bill. Anna was able to use her $100,000 for tuition to go back to school and help her parents with medical expenses over the following two years while only incurring $100 in additional taxes – a big difference! However, if Anna and John didn’t have current cash needs the end results would look very different in 10 years. Anna was never involved with the finances and making those types decisions made her nervous. During the next 10 years she left the $100,000 in a CD that ended up being worth $101,004 (based on today’s interest rates). John had a brother who worked at Amazon who encouraged John to keep the Amazon stock. Without purchasing additional Amazon stock, after 10 years it was worth nearly $260,000 because it grew an average 10% per year – more than a 150% difference! Conclusion The financial results that individuals experience post-divorce can be significantly distorted when a 50-50 division of property concept is solely relied upon. It is critical to understand financial components, your priorities and how suggested division plans affect your bottom line in the future. Financial education and professional analysis before signing the final papers is more important than ever to build a strong foundation for the next chapter in life. Let’s build a property division strategy that works best for you and your future! You wouldn’t retire without a financial plan… it might be messy! Don’t divorce without one either! Get the information you need to get started here, or Click here to schedule a free initial consultation with Amy", "author" : { "@type" : "Person", "name" : "max.melomed@gmail.com", "sameAs" : "", "url" : "https://amf-divorce.com/our-blog/author/max-melomedgmail-com" }, "dateModified" : "01/06/2022", "datePublished" : "01/06/2022", "headline" : "Property Division Values, Part 2: Non-Retirement Assets", "image" : { "@type" : "ImageObject", "height" : 400, "url" : "https://cdn2.hubspot.net/hubfs/39875594/Imported_Blog_Media/e261dd_d28e6554adb0418a812e7205893dd778~mv2.webp", "width" : 750 }, "mainEntityOfPage" : "https://amf-divorce.com/our-blog/property-division-values-part-2-non-retirement-assets", "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "" }, "name" : "A.M. Financial", "url" : "amf-divorce.com" } } ```