Divorce is never something anyone plans for, and it’s rarely an easy experience. It happens, though, and the process can be complicated and emotionally charged, especially when real estate assets are involved. While it’s important to aim for and work toward a fair and amicable resolution, it’s equally crucial to prepare for the possibility of conflict if you want to safeguard your assets. With that in mind, we offer these 3 tips for protecting your Lehigh Valley, PA real estate assets when going through a divorce, especially when it ends in the sale of the home.
1. Take the Necessary First Steps
Divorce is an emotional time, but it’s important to stay focused and take proactive steps to approach the process with clarity and logic. To help you safeguard your Lehigh Valley, PA real estate assets in a divorce, here are some key preparatory measures to consider early on…
Prepare Before Filing
“Remember, everything is subject to division during a divorce settlement. Take proactive steps to protect your assets before filing and gather important evidence to support any claims you plan to present in court.”
Inventory Non-Marital Assets
Take the time to create a comprehensive inventory of all property you acquired before the marriage, ensuring you gather supporting evidence and proper documentation for each item. This includes deeds, purchase agreements, or other records that clearly establish your sole ownership of assets.
“It’s crucial to collect and organize your real estate records and other important documentation early—ideally before your spouse initiates divorce proceedings. Being prepared in advance can strengthen your position and protect your Lehigh Valley, PA real estate assets in a divorce.”
Get an Accurate Valuation of Your Real Estate Assets
“Many people overlook the impact of taxes when evaluating their investments, especially when it comes to assets like retirement accounts with deferred tax obligations. For instance, withdrawing funds early from a retirement account may not only trigger taxes but also incur additional penalties, significantly reducing the net value of the account.
When assessing the value of property and investments during a divorce or any financial planning, it’s crucial to account for these potential tax liabilities. By factoring in these implications, you can gain a more accurate understanding of your financial standing and make informed decisions about asset division or long-term planning.”
Choose Battles Wisely
The reality is that not every asset is worth the time, effort, and expense of a legal battle—especially when you factor in the high costs of attorney fees. Before deciding to pursue a specific asset in a divorce settlement, take the time to evaluate its actual value compared to the potential cost of legal representation.
For example, spending thousands of dollars in attorney fees to fight over an item with limited monetary or sentimental value may not be a wise decision. Instead, focus on prioritizing the assets that truly matter to you—whether due to their financial worth or personal significance—and consider negotiating on less critical items. A strategic approach can save both time and money while helping you achieve a fair and balanced outcome.
Consider Getting a Mediator
Divorces can be costly, and the final outcomes may not always align with your expectations. To reduce expenses and streamline the process, consider working with a mediator. Mediation is often significantly less expensive than hiring attorneys and can help both parties reach a fair divorce agreement more amicably.
2. Implement These Tactics
Here are three key steps you can take to safeguard your real estate assets during a divorce. They include…
Use Equity to Your Advantage
One strategy to safeguard your Lehigh Valley, PA real estate assets during a divorce is by managing and understanding the equity in your property, particularly in cases of negative equity.
“You can protect real estate assets that you own and have purchased individually by strategically monitoring and, in some cases, maintaining negative equity. Equity is a key factor in determining the value of a property and plays a significant role in asset division during a divorce. Divorce attorneys calculate equity by subtracting the remaining loan balance from the property’s current market value. The resulting equity is typically what is divided between the divorcing parties.
If a property is in negative equity—meaning the loan balance exceeds the market value—there may be little to no value for division. While this approach might not be ideal in every situation, it can serve as a strategic way to protect certain assets and minimize their impact on the division of property in a divorce settlement.”
Prove Assets Are Premarital
In a divorce, assets acquired during the marriage are generally considered part of the marital estate and subject to division. However, it is possible to protect certain assets by proving they qualify as non-marital property.
“For real estate purchased before the marriage, you must demonstrate that any loans or debts associated with the property were fully paid off prior to the marriage. This proof is critical because if any payments were made toward the loan during the marriage, especially with joint funds, the court may determine that the property has only partial non-marital value.”
To establish an asset as non-marital, gather documentation such as loan statements, payment records, and title deeds that clearly show the property’s financial status before the marriage. Without sufficient evidence, the court may deem that part of the property’s value belongs to the marital estate, making it subject to division. Taking these steps can help ensure that your pre-marital assets are properly protected in the divorce settlement.
Consider Setting up a Land Trust
Real estate assets you acquired before the marriage can be placed into a land trust, a strategy that offers significant protection. A land trust shields your property from creditors and legal claims while also serving as a safeguard during divorce proceedings, helping to prevent the loss of your property.
Here’s how a land trust works:
“A land trust provides protection by keeping your ownership of the property private. When the property is placed in a land trust, the trust becomes the legal owner, and your name no longer appears in public records related to property ownership. Instead, only the trust’s name is listed, maintaining your anonymity and adding a layer of protection.”
By separating your name from the property through the land trust, it becomes more challenging for litigators or creditors to target the asset, and it may reduce the risk of it being divided during a divorce settlement. This level of privacy and protection can be a valuable tool in securing pre-marital assets.
3. The Process of Selling Real Estate Assets in a Divorce
In some divorce cases, both parties agree to sell the property and divide the proceeds. If this is the plan, there are important steps you should take to ensure your share of the real estate assets is properly protected.
Set an Asking Price
Setting the right price in line with market value is essential when selling real estate. This is why partnering with a local agent who has a deep understanding of the Lehigh Valley, PA market is highly recommended. To discuss pricing with a knowledgeable Lehigh Valley, PA agent, give us a call at (484) 549-0019.
Prepare for Showings
“Preparing the house for sale is often the most challenging part of the process. Typically, there’s some work that needs to be done—such as minor repairs, painting, and other touch-ups—before the property is ready to show. It’s important to agree on how these costs will be covered. If both of you have moved out before listing the house, you can leave it in the hands of your agent to handle staging for potential buyers.”
Review Offers
When offers from potential buyers start coming in, it’s important to collaborate and carefully review them together. In the midst of a divorce, there’s often a tendency to rush through the process to get it over with, which can lead to accepting an offer that’s less than ideal. To avoid this, rely on your agent’s expertise to guide you in evaluating offers and making the best decision for both parties.
Divide the Proceeds
The final step in the process is dividing the proceeds from the sale. “This is usually straightforward—the escrow company handles the distribution of funds, deducting obligations such as the remaining mortgage balance, taxes, and agreed-upon expenses before splitting the net proceeds.”
Complications may arise, however, if “one spouse has been making post-separation mortgage payments. These payments typically reduce the principal balance and increase the equity in the property, potentially affecting the amount to be divided. In such cases, the distribution should be adjusted to reflect the contributing spouse’s additional payments, ensuring a fair allocation after closing costs and obligations have been settled.”
An Important Aspect of Protecting Real Estate Assets
If you and your spouse or ex-spouse decide to sell property, partnering with an experienced Lehigh Valley, PA investor can be a smart move. Their expertise in the local market and objective approach can help ensure you secure the best possible deal, free from the emotional stress that often accompanies such sales. If your goal is to protect your Lehigh Valley, PA real estate assets when going through a divorce, be sure to contact us today at (484) 549-0019.