Should you buy a house before the divorce is final?

Many of us don’t have the option of buying a home during the process of divorce due to financial constraints. Even if you have the resources to afford the down payment, mortgage payments, property taxes, and upkeep, careful thought should still be given to this idea.

Going through a divorce is highly stressful. You likely will experience a wide variety of emotions, including the fear that you won’t have anywhere to live. At the beginning of a divorce, many questions remain unanswered about you and your spouse’s financial future. You can count on one thing: many changes are coming. Most legal, financial, and psychological experts advise that couples who are going through divorce not charge forward with major financial decisions. It just doesn’t make sense.

If you buy a home during the divorce process, you conceivably would be purchasing a house with funds that belong partially to your soon-to-be ex-spouse. If you intend on buying the house in your name alone, title and escrow companies still will require your spouse to attend the closing, sign the documents, and basically give permission for the home to be purchased in your sole name. In fact, many attorneys require the non-purchasing spouse to sign a special agreement to permit the purchase of a home by the purchasing spouse during divorce proceedings.

Granted, during the divorce process, your spouse and you could buy a house and place both the title and/or mortgage in both of your names. This generally is not a good idea for a host of reasons. You first should discuss this with your attorney if your spouse and you are considering doing this.

During the divorce process, “temporary orders” or “temporary restraining orders” (also known as “temporary injunctions”) often are put into place to prevent spouses from spending down assets or incurring new debt. Typically, a temporary order specifically forbids both spouses from using community funds for major purchases without first obtaining the consent of the other spouse (and possibly the involvement of the attorneys). Further, a temporary order typically instructs both spouses not only to spend only what is absolutely necessary to sustain their individual households, but also to notify the other about any expenses that are out of the ordinary, even if “separate funds,” i.e., non-community funds, are used for that expense.

It is also possible that purchasing a home during divorce could ultimately result in financial difficulties for one or both spouses. One spouse might be approved for a loan on a new home based on his or her current income and expenses. However, this doesn’t take into account future debts–the amount of which might be unknown at the time of purchase–such as debts pursuant to final divorce documents, e.g., child support, alimony (referred to as “spousal maintenance” in Washington), a “lump sum” pay-out to the other spouse, etc.

It may make more sense to rent a home temporarily instead of buying one during divorce. While it may be possible to purchase a home while going through the divorce process, it generally is ill-advised and can be problematic–especially buying a home where both spouses are on title and mortgage.

The Levey Law Group recommends that you consult with your attorney and financial advisor to thoroughly address the following: 1) the long-term effects of financial decisions such as home purchases; 2) the tax implications; 3) future projected financial responsibilities; and 4) other factors.

If you have any questions regarding this topic or any other topic related to divorce, please call our office at 253-272-9459 to schedule a consultation.

Temporary orders can protect both spouses at the onset of divorce

For many people facing divorce, a common concern is the disruption of financial security during the divorce process. This can be especially frightening and overwhelming when a stay-at-home parent, a financially dependent spouse, or a disabled spouse is facing divorce. And understandably so.

Attorneys with The Levey Law Group often hear comments such as, “My spouse earns much more than I do, how will I support myself and my children on my income alone while I’m going through divorce?” Or, “My spouse has complete control of the household finances.” Another common concern voiced by those facing divorce is, “My spouse is threatening to take away my children if I file for divorce since he/she makes most of the income.”

Rest assured, we offer a variety of solutions to these and other concerns with regard to helping clients maintain their financial stability during the divorce process.

While the divorce is pending and agreements are being worked out, most couples benefit by setting up temporary orders to protect their assets and credit during the divorce process.

 Temporary orders can determine who stays in the family home, make arrangements for the care and support of children, make arrangements for the support of the other spouse if warranted (commonly known as alimony, but referred to as “spousal maintenance” in Washington), and who is financially responsible for the mortgage payment, utilities, car payments, etc. These orders also typically set rules restraining any inappropriate conduct by divorcing spouses.

We have found that spouses often can agree upon reasonable, temporary financial arrangements  that will tide them over until the divorce is final. Either spouse’s attorney can draft temporary orders (which might include a child support order) for the other attorney–and both spouses–to review and sign. Once everyone signs these orders, a court commissioner signs the agreed order which makes the order an official court order that both spouses must abide by.

If the couple have children, a temporary parenting plan also can be drafted.  Agreeing on temporary orders early on offers everyone involved some breathing room. This also alleviates fears, moves the process along, and may prevent court hearings down the road.

A temporary order also can include a provision ordering that one spouse (typically the higher wage-earner) help pay the other spouse’s attorney fees.  On that note, as far as paying attorney fees, The Levey Law Group accepts credit card payments from clients, and also offers an online payment option called LawPay. These options may work for clients who might not have the cash reserves available to finance a divorce. LawPay also may be a good solution for clients wanting to preserve what cash reserves they have to pay for unexpected expenses during the divorce process.

The first step in securing your finances during divorce is to call our office and schedule a consultation. We will answer your questions, and assist you with these and other concerns you may have about the divorce process.

Disclaimer: The information above is provided as a guideline and offers only general information. It is not intended to be a substitute for–nor is it–legal advice or counsel. For more specific details regarding your family law questions, please call The Levey Law Group at 253-272-9459.

Changes to tax law may impact your divorce strategy

If you are considering divorce this year, you may want to be aware of a change to the tax law set to take effect next year. This tax law change will impact divorce finances, and spouses who may be eyeing alimony as a component of their divorce settlement.

Federal income tax laws surrounding alimony or spousal maintenance will change in 2019 due to the “Tax Cuts and Jobs Act,” which both houses of Congress passed on Dec. 20, 2017.  While this change won’t take place until 2019, couples may want to consider those changes with regard to their divorce strategy now. It may mean working toward being divorced in 2018, before the law changes. Your strategy depends on the specifics of your case and how changes to that law might affect you.

For the last 75 years, alimony was deductible for the payer, while the recipient paid income tax on it. For all divorces after Dec. 31, 2018, alimony will no longer be deductible for the payer, and the recipient of alimony will no longer be required to pay income tax on alimony.

For example, a man who earns $500,000 a year and is in the top tax bracket may decide to pay his ex-wife $100,000 a year in alimony. After a tax break, that will only cost him about $50,000. The ex-wife would receive the $100,000, but is left with $75,000 after taxes. In 2019, the ex-husband may argue that he can only afford $50,000 a year in alimony. So, the ex-wife would then get that $50,000 which is $25,000 less that she would have under the old law.

Divorce attorneys and financial analysts are still scrambling to better understand the changes to this law that’s been in the tax code since 1942. Many attorneys and mediators fear the potential impact of this change and predict more cases could go to court, divorces may become messier,  more people may be forced to stay married due to the expense, and more couples may rush to get their divorces finalized in 2018 so they can still take advantage of the old law.

One expert believes the new law reduces the bargaining power of vulnerable spouses, mostly women, in achieving financial stability after a divorce. The U.S. Census Bureau shows that 98 percent of the 243,000 individuals who receive alimony or spousal maintenance in 2017 were women.

If you are considering divorce and the prospect of alimony, call our office at 253-272-9459 and make an appointment to discuss what we’ve learned about this new tax law.