[quote=SK in CV]BG, this sounds like horrible divorce representation. Under the scenario you described, absent a specific waiver of reimbursement, the value of the home contributed to the community would be reimbursable to the contributing spouse, irrespective of how the home was transferred to the community.
These kinds of problems would be easily avoidable in the case of a Roth (or other self-directed retirement plan). Even employer sponsored plan equity is separate property, to the extent it was earned prior to marriage.[/quote]SK, I see where a statement in my post could have been miscontrued:
[quote=bearishgurl]. . . They end up recovering very little equity from the forced sale of their former parent(s) home because it is now mortgaged (in some cases repeatedly) and half of it now belongs to their spouse, who lived with them in the home while married and also signed the note(s) on the mortgage(s) they took out together. . .[/quote]
SK, I DO realize that in CA the non-heir spouse on title receives a portion of the heir-spouse’s ownership of their inherited property’s equity in a divorce based primarily upon how long ago they inherited it prior to quitclaiming it to both spouses.
The individuals I referred to here were ALL represented by counsel during the settlement of their divorces (I only learned about their problems with losing their properties to SS or FC AFTER they were already divorced). In two of the cases, I worked on the divorce myself and submitted that work to their attorney for filing and service.
Example of what I have found to be a common scenario in SD: Married in 1975 (first marriage for both). Couple are renters until 1979, when one spouse “inherits” the family home of ~1300 sf after last parent died. Heir contracted to purchase brother’s half for $17K at 10% per annum in installments over 4 years (a “bargain” at the time). By 1986, heir-spouse owns home free and clear and has three growing kids and feel that they are growing out of their house so they seek to mortgage their home to obtain funds for a remodel. The owner (heir-spouse) is told they don’t have enough income by themselves to qualify for the ~$60K mortgage they are seeking (mtg interest rates were much higher back then). So they cooperate with mtg broker and “quitclaim” their “inherited” property to themselves and their spouse (who is working FT) in order to qualify for the loan. Heir’s spouse signs the note and TD along with heir and after receiving the proceeds, they commence work on a ~500 sf addition to better accommodate their family. The work is finished less than a year later and the couple end up refinancing “cash out” four more times (in ’89, ’92, ’93 and 2003) to enhance their lifestyle (the “heir spouse” is still bringing in little to no income). With their kids grown and gone, the couple ends up separating in 2008 and divorcing in 2009. Here, the non-heir spouse’s portion of the home equity was complicated by them being able to prove (with old paystubs) that they helped the heir-spouse buy out their brother’s equity in those four years long ago at a time when both spouses were still working. Upon settlement, a portion of the non-heir spouse’s “payoff money” to heir’s brother was attributed to “rent” because they had to live somewhere during those four years. Here, the non-heir spouse ended up receiving an award of 48% of the equity of the family home (now in the “community”) which was calculated as follows: 29 years ownership by heir. 22 years ownership by heir’s spouse + 2 years ownership added (for helping to pay heir’s brother off for 4 years) totaling 24 years ownership by heir’s spouse. The property sold in 2010 where heir received ~55% and heir’s spouse received ~45% of the ~$25K of sales proceeds from escrow (after liens were satisfied).
This isn’t the story of either female I was referring to but a (rather convoluted) version of what SK is likely referring to here. In most cases, the non-heir spouse (on title) is awarded a lesser percentage of the heir-spouse’s inherited property upon divorce. I think the above story illustrates that truth is often stranger than fiction when “life happens” over the years.
Those two “boomer” females I was referring to here had “inherited” their family home (in 2000 and 1997) during a time when they were both single (divorced). Both remarried soon after inheriting their family home (several months to 3 yrs later). When those marriages ended in divorce, they and their spouses had already borrowed so much of the property’s equity (in two or more cash-out refis and a HELOC) that there was very little equity left to split in one instance. In the other instance, the couple lost their home to FC.
It is especially sad for the 1st heir, who ended up receiving only ~$10K equity from the sale of her childhood home post-divorce which she “inherited” free and clear about 8-9 years earlier (she was still working after her last parent died and was able to buy her sibling out of their half). Both heirs (unwisely) co-mingled their inherited CA property with a new spouse in order to receive cash from its equity for a variety of purposes. The second heir and her spouse simply went though the equity of the inherited home in >3 years and then squatted for a time before the “heir” was finally evicted by her foreclosing lender while she was living alone in it with no income coming in (after her spouse had already left the home).
IMO, this wouldn’t have happened to either heir if they had kept working after remarrying … at least part time, and kept a separate checking account to pay the property taxes, homeowner’s insurance and for all the maintenance, repairs and any remodeling of their “inherited” property from. Even if their spouse did any of this work (non-licensed contractor spouse), he should have been paid for it. If they cut a cashier’s check to their spouse for the fair-market value of the work he performed and kept the carbon copy, even if the husband kept the check without cashing it or later returned the check to the wife uncashed (for illustration purposes only – roles could be reversed), it is proof positive of the heir-wife’s intention was to pay the husband a set amount of money for the work he performed on her property. This could serve to successfully block a later claim of a portion of “ownership” by the non-heir spouse in the case of a divorce.
The above scenarios were all absent a prenup (which way too many people don’t see the need to pursue prior to remarriage … to their eventual peril, imho).
