Financial gurus will tell you: a new car purchase is really three deals (sell the old car; buy the new car; arrange the financing). Car dealers want all that to happen on their lots. Financial advisers tell you to keep the three deals apart. The principle holds true with divvying up marital property during separation and divorce: keep the deals — separation, refinancing the marital home, and divorce — apart.
Get that Property Settlement Agreement First
Most of us are comfortable setting out on journeys if we have a map. Separation is a journey, and the property settlement agreement is the map. Without the map, you are driving into your future blind and vulnerable. Before you consider refinancing the marital home, consider getting all those details spelled out in the property settlement agreement.
The separation agreement (another name for the property settlement agreement) is not only a tool for driving the separation, it is the guide for the subsequent divorce. Everything that goes into the arrangements for separation will also be rules to live by in divorce:
- Child custody
- Child support
- Spousal support
- Equitable division of property
That last zinger is, for many Virginia men, the meat-and-potatoes of the process. Who gets the marital home? How much of my retirement account will she get? Who gets the vacation home? Will we have to sell off all the boats, motorcycles, and RVs?
You should make no financial decisions about equitable distribution of property without the framework and guidance of the separation agreement.
Focusing on Compromise
Suppose you both agree to the separation and want to avoid a contested, at-fault divorce. You are then agreeing to settle every issue amicably, through a property settlement agreement. Compromise must drive the discussions.
Let’s say you want to hold onto your 401(k) or 403(b) accounts in full. By Virginia law, she is entitled to an equitable (not even) share of your accounts, but …
… Suppose your 403(b) retirement account is worth, say, $250,000 and your marital home is worth $500,000. You can agree in the property settlement agreement for your separating spouse to assume the mortgage by herself and refinance without paying you a share of that equity in return for her agreement that your 403(b) stays with you.
This is a compromise you can both live with. She retains the marital home, you get your name off the mortgage, and you retain your retirement savings.
Find Your Leverage
Most family law attorneys recommend refinancing the marital home after the property settlement agreement is ironed out. Your family law attorney is your best advisor on the strategies you need to preserve:
- Your capital (retirement accounts, savings, investments)
- Your credit rating after divorce
- Your rights as a Virginia man
Your financial advisor may view things differently than your divorce lawyer, but the decisions you and your attorney make while drafting the property settlement agreement will linger long after divorce.
You need to use the leverage you have in the things you own — the vacation cabin on Lake Anna, the ATV, your equity in the marital home — while you still own them.
Your hope in refinancing after the property settlement agreement is that one of you can take full ownership, removing the other spouse from mortgage and title alike. Yet you must face a reality: you may not get favorable financing.
To preserve the smooth sailing of an amicable separation and divorce, insert a clause in the property settlement agreement that requires sale of the house with an equitable split of the proceeds if financing cannot be obtained. A Virginia Circuit Court judge will accept a property settlement agreement that includes a clause specifying disposition of the marital home: either one spouse owns it outright, or it will be sold and the proceeds divided proportionate to your financial contributions (or not at all, depending on your agreement).
Find The Big Picture with The Firm For Men
Having the refinancing done according to the separation agreement makes all subsequent steps easier. Still, remember to step back and view the big picture, rather than get hung up on only one part of your assets.
The marital home is a big deal, but it may be less important than the combination of your savings, investments, retirement accounts, and other personal property.
For practical solutions to ponderous problems, contact us at The Firm For Men. You can also call our office at (757) 383-9184. We can help with every aspect of divorce, including separation agreements, equitable division of property, and preserving your rights.