Dividing Property after Divorce with a 1031 Exchange

 

Real Estate, whether it is the marital home or investment property, is one of the greatest assets owned by married couples. Typically in a divorce situation, the property is sold or retained by one party, and ownership is transferred solely into their name. 

When real estate property owned is sold, each party may be subject to capital gains tax. Depending on the value of the property at the time of the sale vs. the initial acquisition cost plus improvements, it may be wise to speak with a financial planner to weigh all options such as a 1031 exchange. (IRC Section 1031 – like-kind exchange)

Per IRS rules, a 1031 like-kind exchange provides an exception that allows you to postpone paying capital gains taxes if you reinvest the proceeds from the sale of an investment property (the “relinquished property”) into a similar property (the “replacement property”) as part of a qualifying like-kind exchange. The seller has 45 days to identify a...

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The Deed. The Decree. The Debt.

 

The deed, decree, and debt all intersect during divorce yet all three need to be dealt with separately in the settlement process.

The Deed.

When transferring ownership of the marital home from jointly held ownership or from sole ownership to the other spouse, using the correct transfer deed is important for protecting the new sole owner. A Quit Claim deed is the most commonly used transfer deed yet, provides the least protection to the receiving spouse. Without warranties, it offers the grantee little or no recourse against the grantor if a problem with the title arises in the future.

A Warranty Deed may be a much better choice as it provides the most protection to the new owner. This type of deed guarantees that the grantor holds clear title to a piece of real estate and has a right to sell it to the grantee. The guarantee is not limited to the time the grantor owned the property as with a special warranty deed; rather, it extends back to the property’s earliest title. As...

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