While uncertainty continues to plague the real estate market, historically, the spring and summer months have been the best times to sell a home. As we approach these warmer months, experts are optimistic that, despite housing inventory remaining at a near all-time low, mortgage rates will continue to decrease in 2024. For individuals looking to buy or sell real estate this year, there are a variety of things that you can do to seek to protect your separate property interests in this real estate in the event of divorce.
When parties divorce in Ohio, the courts must equitably divide the marital estate. This means that the court must first determine what is marital property and what is the separate property of either spouse. Any property acquired from the date of marriage to the date of a final hearing terminating the marriage is presumed to be marital property. Separate property, conversely, includes any assets owned by either party prior to the marriage, inheritances, gifts or assets explicitly designated as separate through legal agreements. The party asserting a separate property interest must prove that they own this interest.
There are a variety of ways that individuals can acquire separate property interests in real estate. One party may own a home prior to the marriage that the parties then live in during the marriage. One party may sell a home owned prior to the marriage and then use the proceeds for the down payment on a residence purchased by the parties during the marriage. One party may use funds received from an inheritance to pay for an addition to a residence. Regardless of how a party acquires a separate property interest in a residence, however, there are a variety of things that they can do to prove this interest more easily in the event of divorce.
First, couples may consider entering into a prenuptial or post-nuptial agreement that identifies the separate property interests that either has as of the date of the agreement and how the parties intend to distribute property owned by either or both of them in the event of divorce. Even without such an agreement, however, individuals can take important steps to demonstrate or “trace” their separate property interests. The easiest way to do so is by maintaining thorough records regarding the purchase of the property, any separate funds contributed to the purchase, and any separate funds used toward improvements to the property.
Because banks and other businesses are only required to keep records for a certain number of years, it is important for individuals with separate property interests to maintain these records themselves. Individuals should begin by gathering all relevant documents that establish their ownership interest in the property, including deeds, purchase agreements and mortgage documents. Next, individuals should gather and maintain records showing their use of separate funds for the purchase of, or improvements to, the property, including bank statements and receipts. If an individual has a premarital interest in a residence that the parties then live in during the marriage, the party should obtain a mortgage statement as of the date of marriage. To further simplify tracing of their separate property interests, individuals should also consider opening new accounts solely for the purpose of housing funds they receive by way of inheritance, gift or separate proceeds received from the sale of real estate or other assets.
Ultimately, I encourage anyone looking to protect their separate property interests in real estate to maintain careful records and to consult with an experienced family law attorney about the best ways to protect their interests in the event of divorce.
This article originally appeared as a column for the Cleveland Jewish News.