Thinking about a home refinance during a divorce? Be careful. One of the biggest mistakes is a spouse inadvertently “gifted” their non-marital home to the spouse. Then, they want a divorce. How does this happen? When one spouse owns the home prior to the marriage, the other spouse gets added to the deed during the refinancing process. This converts the home to a marital asset.
For example, before marriage, Tom owns a home. Tom marries Susan, and Susan moves into Tom’s home. Tom decides he wants to refinance the home, which is only in his name and is therefore his non-marital property. The financing company insists that Tom add Susan’s name to the deed. So, he adds her. He inadvertently converted what was once his separate, non-marital property into a marital asset. Years later, Tom and Susan are divorcing. Now, Susan’s attorney argues that because Susan’s name is on the quitclaim deed, the home is a marital asset. It should be equitably divided between the parties. Unfortunately, the burden then shifts to Tom to show that he didn’t intend the home as a gift. This is very difficult to do unless the parties signed something at the time indicating it was not a gift. Therefore, Susan will most likely receive half the value of the home in the divorce.
Avoiding the Divorce Home Refinance “Gift Trap”
To avoid this possibility, ask the financing company if your spouse can just consent to the mortgage and not the deed when refinancing. If the financing company still insists on the deed, consult with a real estate attorney to make sure that doing so is absolutely necessary. If it is necessary in order to refinance, get your spouse to sign an agreement at the time of the refinancing. The agreement should state that the financing company is only adding the other spouse for the purposes of refinancing. The house is not a gift. If they won’t sign and you still need to refinance, send them an e-mail advising them that your intention is not to make a gift of the property. The adding of their name to the deed is only for refinancing purposes.
Do you have more questions about divorce home refinance or any other assets in a divorce? Please contact the Heskin Martinez Law Group. We have almost 40 years of combined Family Law experience and are dedicated to our clients. Use the contact form below or call us immediately at 407.403.5990.