The seven biggest mistakes made in divorce, and how to avoid them.
Please consult with your attorney. Consult with your tax accountant. Stay to the end, stay to the end, stay to the end because we’re going to give you a couple of free tools that can make you and save you tens of thousands of dollars.
Number one is people don’t realize that California and this is where we are. California is a community property state. What does that mean? I’ll tell you what it means. It means anything you acquire: a 16-unit apartment building, a Tesla, even if it’s all your money, when you get it after you’re married, your spouse has a half interest in it. So you may want to talk to an accountant, speak to a lawyer, prenup, whatever, take care of that, so you may not want them to own the Tesla or the 16-unit building 50%. So number one, California is a community property state. Beware.
Number two: Almost everybody falls for this one. A quitclaim gets me free of responsibility for the property. I hear so many people say, “My spouse ruined my credit.” This point is crucial. It makes sense. You are using a quitclaim deed to remove your responsibility to the property or title but not to the loan. Title and the loan are two separate things. You may be off the title, but you’re still responsible for the loan. So what do you do? You’re going to have to refinance or sell. Mistake number two is thinking a quitclaim deed is going to relieve your responsibilities. Not at all. Common mistake.
Number three, it’s the same thing with homeowner’s insurance. You want to make sure you are one of the beneficiaries. Meaning if the house burns down, they don’t write a million-dollar check and give it to your spouse and nothing to you. You want them to give two checks for half a million each. So please make sure the insurance is up to date, make sure it’s paid, make sure it’s existing, and make sure that you are listed as a beneficiary.
Mistake number four is, let’s say we decide to keep the house. You move, I’ll stay. Let’s try to figure it out evenly. There’s a lot to consider. They’re not doing anything. You have to make the mortgage payment. You have to pay the taxes. You have to pay the insurance, and you have to maintain the property. I managed a home for a lot of years. We had to redo the driveway. I mean, a lot of years, the rain gutters, the garage door. We had to redo the pool lining. It went on and on. A new heater we put in over the years. I mean, you could, you could be responsible for $10,000, $20,000, $30,000, $40,000. So you need to figure that out or go ahead and sell. It makes it a whole lot easier.
Mistake number five is selling your home after you’re divorced for tax purposes. You want to sell your home before you get divorced for tax purposes because there’s a $500,000 exemption. It means you don’t have to pay taxes on that $500,000 of profit, nothing. But guess what? You get divorced, that 500,000 gets cut in half. Mistake number five, selling your home after the divorce. Not good tax-wise.
Mistake number six, and this is a little-known fact. I just learned it myself. You can get a temporary restraining order, meaning your spouse can’t refinance or sell the home when you’re not looking. I don’t want that to happen to you. Talk to your lawyer and get a temporary restraining order or property restraining order, so they can’t do that.
Mistake number seven: If you do settle the property issues, your divorce will take about 12 months. But if you don’t, it’s going to take probably 16, 17, 18 months. So if you want to be done with it six, seven, eight months sooner, go ahead and settle the property. Get the property sold so it’s out of the way.