I was today years old when I learned that the HGTV channel has been on air since 1994. Isn’t that wild?!
As the “House Hunters” universe alone has expanded to include “House Hunters: Renovation,” “House Hunters: Where Are They Now?,” to the latest spinoff, “House Hunters: All Stars,” it’s safe to say we’re all a little obsessed with finding and securing our piece of the American Dream.
If you’re reading this, you’re probably a homeowner getting ready to tie the knot, buying a new home, or even already married! Either way, since buying a home is one of the biggest purchases in a person’s life, how can you protect this investment? Let’s dive in and discuss how to protect your house in a marriage.
Drumroll Please…(Spoiler alert: It’s a prenup)
You can protect your house in a marriage by entering into a prenuptial agreement, of course! Bet you didn’t see that one coming, huh? But seriously, prenups are the gold standard when it comes to protecting your assets. They’re kind of our thing if you haven’t already noticed.
Prenups provide a simple yet effective way for you to specify what will happen with your home in the event of a divorce. In your prenup, you and your fiancé can agree that your home will be classified as your separate property. This means the house will not be subject to division in a divorce. No muss, no fuss.
How Does a Prenup Work With a House?
Prenups include provisions that protect the equity you have in the home and any potential appreciation on said home. For example, if you have already made some smart real estate purchases or plan to do so soon, then your prenup should address your current equity in the home, any future appreciation, and any future home purchases.
Protecting Appreciation
Let’s say you purchased a home in a neighborhood experiencing tremendous economic development. This could look like the construction of new shopping plazas, homes, office buildings, or even sports arenas. With time, your home’s value is bound to increase.
In a divorce, your spouse could be entitled to a portion of any appreciation during the marriage. This is still possible even if the home is deemed to be separate property. However, you can avoid this possibility with a prenup. A prenup allows you to classify your home and any appreciation as separate property that will not be subject to division in the event of a divorce.
Alternative Options to Prenups
Of course, we recognize that a prenup may not be everyone’s cup of tea (full disclosure: we’re actively on a mission to change that).
We might be a bit biased, but we don’t want to miss the opportunity to bring up these other potential property protection strategies:
Establish a Trust
A trust is a legal arrangement where ownership of designated property is held for the benefit of another person, or just yourself. Property in a trust is designed to pass directly to a named beneficiary upon death.
When you set up a trust, you transfer ownership of the home to the trust itself. So, technically, you no longer own the home. Why? Because the trust does.Placing your home in a trust before you get married can be a viable workaround to protect your property from being subject to division in the event of divorce.
This is just one of many areas where family law and estate planning intersect. Trusts are great estate planning tools, especially if you want to leave your home to children from a prior marriage. Or, if you receive an unexpected inheritance. Can you have both a trust and a prenup? Of course! Trusts and prenups play very nicely together and can accomplish all of your financial planning objectives.
Caveat to trusts
But be careful! It’s not completely foolproof. During a divorce, the value of the trust may be taken into consideration. In some states, the court can decide to award your spouse other remaining assets to level out the playing field. We hate to keep beating the prenup drum, but a prenup is the best solution to avoid this possible scenario.
Interested in setting up a trust? Head over to Trust&Will to learn more about the process and create a trust online.
Keep the title in one person’s name
While it may be tempting to add your new wifey or hubby to the title of your home once you’re married, it’s best to keep the title to your home only in your name. Why? In some states, once your spouse is added to the deed, they own an interest in the home.
Maintain accurate documentation
Remember that giant stack of documents that you received at closing? Make sure to hold on to those, too. Any documentation of the date you purchased the property can come in very handy during a divorce.
Keep funds separate
Additionally, you should avoid using any joint funds to maintain the property. That includes making mortgage payments, paying property taxes, performing renovations, or any general maintenance repairs.
This can become tricky once you start merging your day-to-day life with your spouse. To avoid using any joint funds toward the upkeep of your home, you may also want to establish separate bank accounts to help keep your finances separate. This way, you’re able to maintain records and documentation of the property’s payment history and expenses that you solely cover.
Create a Postnuptial Agreement
If you’re already married and missed the opportunity to sign a prenup, a postnuptial agreement (postnup) is another viable option.
A postnup differs from a prenup in that it is signed after you are married. It can provide the same asset protection as a prenup. In a postnup, you can classify your home as separate property to exclude it from asset division in the event of a divorce.
Ultimately, a postnup can still be helpful in terms of protecting your home, but it may be more difficult to obtain and enforce based on your state’s laws.
Final Takeaways
It’s no secret that we’re partial to prenups as they provide the most effective safeguard against asset division for your home in the event of a divorce. But if you’re unable to go the prenup route for any reason, keeping your home solely titled in your name, avoiding the use of joint funds to pay for the upkeep of your home, placing your home in a trust before marriage, and creating a postnup can also provide you with a measure of asset protection.
As the effectiveness of these tools may vary from state to state, also consider consulting with a local family law attorney who can ensure that you’re taking the right steps to protect your home.
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: [email protected]
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