Divorces and Deeds: What You Should Know Before You Make a Decision
You and your partner plan out for a lifetime of romance, security, and financial stability by supporting each other, so you get married. Believing that you won’t go through any kind of complications or divorce in the future, you add your spouse to the deed of the house and merge your bank accounts.
You both are now 50/50 co-owners of your house and assets. Fast-forward a few years, you’re now wanting a divorce, but you make triple what your spouse does, and the house was yours first. Here’s what you should know before making any significant decision like this.
What happens if I add my spouse to the house deed?
A person may decide to add their spouse to the deed for several reasons. The person feels their marriage is strong and that their spouse deserves to be on the deed as well. Placing someone on a deed provides them with a level of protection should one spouse pass away. Depending on how the person is added, there could also be tax consequences. Also, not all rights to property mean that there are rights of survivorship.
In other words, if your spouse passes away, they are entitled to leave their share of the house to whomever they like. Make sure that this is the decision you’d like to take, since it cannot be reversed later without the permission of the new co-owner. If you find yourself already in this position because of a divorce, one of our experienced attorneys will be able to assist you with any questions you may have regarding your money and physical assets.
What about equitable distribution?
Equitable distribution refers to the marital property being allocated equitably in a divorce proceeding. Not all states participate in this, but Tennessee does. Some states abide by the concept of community property, in which each person in the marriage is entitled to an equal share of all assets, no matter who purchased them. It also includes income: your income in these states would be considered as an asset to be equally shared with your spouse in a divorce case. Thankfully, in Tennessee, you could be making much more than your spouse, but this income will be yours in this type of proceeding.
When your spouse is added to the deed, the whole value of the property will be exposed to equitable distribution.. Before a spouse is added to the deed, the only amount that will be subject to equitable distribution would be the amount of value the home has gained from the time they were added to when the divorce became finalized. With equitable distribution in Tennessee, no amount of income matters, but that also applies when it comes down to deciding how “fair” it is that half of your home’s value is given over to your spouse.
Some things to consider before adding your spouse
Besides the obvious fact that you will have to split everything 50/50, before adding your spouse to the deed, there are a few more restrictions and aspects to consider. If you have a homestead exemption on the house to save money on property taxes, there is a chance you could lose this status. Your mortgage lender might also have a lot to say about you adding your spouse to the deed: they could flat-out refuse this amendment. If that spouse has bad credit, for example, the interest on the home will shoot up. In the end, getting a divorce might mean a lot of your money has gone to waste.
If your spouse has any kind of judgment against them, the creditor could sue, and you would then be obligated to sell your home to pay this off (especially if you are the higher-earning spouse). If at any point the discussion comes up to refinance or sell the home, the spouse’s permission will be needed. Keep in mind that partial control of the property is essentially sacrificed once the spouse is added to the deed. That other half is no longer and will never be yours again unless the spouse concedes.
Are there any alternatives or other options?
If you are the higher-earning spouse and homeowner and are looking for some other options before jumping into adding your spouse to the deed, here are some alternatives. A will can be prepared so that, should you pass away first, the property can be partially or fully transferred over to your spouse. A prenuptial agreement, known as just a prenup, is designed to protect assets before an event like divorce takes place. It’s essentially a contract that designates the distribution of these assets.
These take place before getting married, whereas a postnuptial agreement occurs after the couple is already married. No one likes to think about the possibility of a divorce in their future; but keep in mind that if you put down the funds for your own home because you earn a good income, there may be some things you might not want to share down the line. One of our attorneys can help you with any questions, concerns, or doubts you may be having regarding your assets.
Going through a divorce is a time-consuming and life-changing event. You could come out emotionally exhausted and in a financially unstable position. If you are facing a divorce and are unsure about what is going to happen to your assets, contact one of our experienced family law attorneys today at the Law Offices of Adrian H. Altshuler & Associates. With offices in Franklin, Columbia, and Brentwood, we will walk you through every step. Call our office, or complete our contact form for a free, no-obligation consultation.