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Dear Moneyist,
I am considering a divorce after 30 years of marriage.
My husband never added my name to the family home he purchased with his previous wife. Seven years ago, I co-signed the mortgage to refinance the house. He promised that if I co-signed, he would add me to the deed.
After checking the assessor’s database, I found this was not the case. If we divorced, would our refinancing turn our house into community property?
My husband is a business owner and received a $500,000 Small Business Administration loan. I am currently not involved in the business. Would this loan be considered community property?
The Wife
You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.
Dear Wife,
Ah, the old “Add you to the mortgage, but not to the deed” trick. It is not as uncommon as you might think.
Your story is a cautionary tale to always put everything in writing, even and especially with a spouse of several decades. Co-signing on a mortgage based on a promise is not advisable. Obviously, tell your husband that you are aware he did not add you to the deed as promised, and ask him to fulfill this pledge to you and be a man of his word. If he refuses, you are indeed in a vulnerable position.
So, first, the bad news. The residence remains your husband’s home if your name was not added to the deed, says Irene Angelakis, a family-law attorney based in New York. “A refinance would not qualify as changing a property over or changing its character from separate property to marital property,” she says. It would only be commingled if the deed adding your name was properly executed and notarized.
Now for the possibly good news, even if you were not added to the deed: “Were there improvements made? Was marital money used to pay off the mortgage?” Angelakis asks. If you contributed to the mortgage or provided finances to renovate the property over the last three decades — and that includes using a joint bank account to make improvements — then, yes, the property will likely be a commingled asset.
If this property value went up, how did you help make that happen? “What did the spouse do to help bring it from $500,000 to $700,000?” Angelakis asks. “That $200,000 in appreciation is where you could see a potential claim depending on what the spouse did to contribute to it and what marital monies, if any, went into it.” Market forces alone would not play a part in that.
A business or business loan is not considered marital property. Angelakis says a lot of business owners tell her, “They want a piece of my business? Why don’t you take a piece of my debt while you’re at it!” Business loans are not being used for paying off a credit card or for the family home. Similar to your husband’s residence, Angelakis asks, “What was the contribution of marital funds [that] were made to this business?”
The answer, as often happens, is longer and more complex than the question. I hope this helps.
You can hear more of the Moneyist’s discussion with Irene Angelakis on this and other issues on “Mastering Your Money” here.
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