Question: I have been divorced for two years and continue to live in the home my ex and I once shared. We each own a one-half interest in the property. According to our divorce agreement, I have paid the mortgage payments, taxes, and insurance while I lived there, but now I must decide whether to purchase my ex-husband's half interest in the home or to sell it, split the equity, and move. I would prefer not to move my children away from their friends and familiar surroundings. As a "stay-at-home Mom," I have not had any credit to speak of in my name. What are my options?
Answer: First, find out how much it will take to buy out your ex-husband. Let’s say, for example, that you and your husband purchased the home for $50,000 ten years ago by making a $5,000 downpayment and taking out a $45,000 mortgage. Let’s also assume that the home now has a fair market value of $100,000. If the house was sold, the equity would be determined by deducting the remaining principal mortgage balance and the sales expenses from sales price of $100,000. If we assume that the equity is $50,000, your former husband’s share would be $25,000.
Second, you must ask the following question: "Do I have the credit standing and sufficient income to service not only the existing mortgage, but also an additional $25,000 debt if financing was available through a home equity loan, refinancing the residence, or a second mortgage?" Even though you do not have credit, we are aware of mortgage brokers and banks which have helped customers with these types of deals.
If the answer is "No", there are other options: (1) Borrow the amount due to your ex from relatives (parents, aunts, uncles) on a favorable basis. Give them a second mortgage. You don't need a credit check this way. (2) Seek an advance on your inheritance from your parents. (3) If your parents or other relatives are in a position to do so, let them each make the maximum gift tax-free gift to you this year ($10,000 per person) and borrow the rest. (4) Ask your parents or other relatives to co-sign and guarantee any loan which you may have to take out. (5) Ask your ex-husband to finance the payout of his equity over time with interest. Secure the note to him by a second mortgage. And ask your folks to guarantee it.
Regardless of which option you choose, make sure to ask your accountant or lawyer about the details and tax consequences.
Question: It was not until three months after my divorce that I found out my ex-husband canceled my car insurance. Can he do this, and what could happen to me?
Answer: Whether "He can do this" depends on what your divorce agreement or decree says. Often automobile insurance coverage is ignored in the negotiation process, so read your papers thoroughly and ask your lawyer. If not specifically addressed in your divorce papers, "He probably can" is the answer. But cancellation of this important coverage without notice can cause you -- and him -- real problems.
Most states require financial responsibility to operate motor vehicles. That generally means insurance. If you had been stopped for driving without insurance, in some states your license could have been suspended and you might be fined. If you had been involved in an accident without insurance, you would have been responsible for the damage to your car and for the damages resulting to anyone to whom you were found to be legally responsible. And if you had been sued, you would have been required to pay your own lawyer and defense costs in addition. Addressing automobile liability coverage at separation and divorce is important and should not be ignored.
Jan Collins is an award-winning writer and editor. Jan Warner is a matrimonial, tax, and elder law attorney. Both are based in Columbia, South Carolina.
Please send your questions by e-mail to janwarner@flyingsolo.com or by mail to P.O.Box 11704, Columbia, S.C. 29211.
