splitting properties after divorce

[Blueberry]

I was wondering about divorce.

Say the couple have a few investment properties, all in the husbands name. Both husband and wife are amicable and desire the properties to be in the wife's name in order to help support her. Problem is that she is unable to get finance to hold the properties in her own name.

The houses currently have little equity, although they are capital growth buys as they were only recently purchased.

What are the possibilities?

1. wife takes option on properties to have it sold to her in 10-15 years. during that time husband gets to claim on tax, so it is pretty neutral and slightly positive in a year or so.

2. sell properties (no-one wins)- actually lose money

3. put houses into trust of some description. joint venture type arrangement or possibly in the children's name.

4. Leave properties in husbands name and he can gift the money in future upon sale if he feels generous. (no guarantee)

any other options?

 

[Terry_w]

You have to weigh up the stamp duty and tax issues as well. Generally exempt on transfer duty on breakdown of a marriage. And CGT rolls over on transfer as a result of marriage break down.

Another option may be to transfer to the wife with the husband going on the loan as either a borrower or a guarantor. Banks will generally allow this for spouses, but maybe not for ex-spouses.

Husband could also sell to spouse payable in installments.

 

[Blueberry]

Thanks for replying. The ability to get finance and tax issues go together. She does not have the high income or and is not in the high tax bracket of her husband. Hence the property would cost her more than it does him.

That is why the idea of an option was attractive. Agree to a low price payable in say 10 years. At that point her income and the ability of the property to sustain itself would have improved. Holding costs during the growth period would be minimal.

If the property is transferred to the wife, it will cost more all around.

The selling payable in instalments. Would the title transfer at the first or last instalment?

 

[Terry_w]

Thanks for replying. The ability to get finance and tax issues go together. She does not have the high income or and is not in the high tax bracket of her husband. Hence the property would cost her more than it does him.

That is why the idea of an option was attractive. Agree to a low price payable in say 10 years. At that point her income and the ability of the property to sustain itself would have improved. Holding costs during the growth period would be minimal.

If the property is transferred to the wife, it will cost more all around.

The selling payable in instalments. Would the title transfer at the first or last instalment?

instalment contract would generally have the title is transferred after the final payment. if there is a loan agreement with a lender then the terms may mean you need the lender's permission to enter into an installment contract.

 

[Blueberry]

instalment contract would generally have the title is transferred after the final payment. if there is a loan agreement with a lender then the terms may mean you need the lender's permission to enter into an installment contract.

That would still require her to get finance wouldn't it? And for her to pay back portion of mortgage until the final payment. eg. if have 50% of price paid, then she has to pay for her portion of mortgage without getting rent as the property isn't in her name (although if they are still amicable then the husband would pay for some of mortgage from rent). Although, his reduction in tax deductibility would also increase costs.

 

[thatbum]

This seems like a lot of effort in order to save a few bucks. What happens if things are so amicable moving forward?

There's a reason that the family court as a 'clean break' policy when determining appropriate financial orders.

 

[Terry_w]

That would still require her to get finance wouldn't it? And for her to pay back portion of mortgage until the final payment. eg. if have 50% of price paid, then she has to pay for her portion of mortgage without getting rent as the property isn't in her name (although if they are still amicable then the husband would pay for some of mortgage from rent). Although, his reduction in tax deductibility would also increase costs.

Not sure what you mean, but no she wouldn't need finance as she would be paying you in small monthly payments. She would need an income to pay these payments, but that could be salary or rents etc.

 

[Terry_w]

This seems like a lot of effort in order to save a few bucks. What happens if things are so amicable moving forward?

There's a reason that the family court as a 'clean break' policy when determining appropriate financial orders.

Yep, i agree completely.

 

[eeew]

This seems like a lot of effort in order to save a few bucks. What happens if things are so amicable moving forward?

There's a reason that the family court as a 'clean break' policy when determining appropriate financial orders.

yes, I would agree here. Family court prefers a clean break.

The cleanest break here would be just to sell them and start over again. Even if it results in a moderate cumulative loss.
The other options call for former husband and wife to be 'tied' by contracts when what they want is separation from as many common obligations as possible [ with the exception of the kids of course and any others within reason].
So many risks with the other options- as mentioned in the above post, what happens if they are not amicable in the future, will these options hold back parties from moving on [ how will future partners interpret them]...etc...