You’ve made a common mistake and moved out of the house once the divorce started. It’s okay, a lot of men make this mistake. However, it’s critical that you don’t immediately compound that mistake by making another one. I’m talking about purchasing another place.
Most personal finance articles and financial planners will tell you that it’s always preferable to buy a residence than to rent, so that you may begin accumulating equity and/or improving your credit score. However, this advice can backfire if you are married, and particularly if you are going through a divorce. In most states, any assets or debts acquired during the marriage are going to be considered marital property by the courts, regardless of whose name appears on the asset or debt. This can pose some tricky choices for you.
If you purchase a new home or a condo after leaving the marital residence, that new house or condo will most likely be considered marital property. Congratulations, you’ve now created yet another asset that must be divided between the two of you. And, in certain circumstances, if you had other reasonable places to stay temporarily, a court might even find that the funds you have used for a down payment could be considered dissipation. Dissipation is a legal term, sometimes called by other names (depending upon the state in which you live) which states that a portion of any funds used for nonmarital purposes during a divorce may be subject to reimbursement to the other spouse. This clearly complicates things for you if you are looking to purchase a new place to live. Often, it’s much simpler and much easier to simply bite the bullet and rent or lease an apartment until the divorce is over.
Another problem with purchasing a new residence is that you will undoubtedly want to furnish said residence. Unless you’ve purchased a studio condo, you will most likely spend thousands of dollars (sometimes tens of thousands of dollars) buying furniture, appliances and technology for the residence. Even if the court doesn’t penalize you for using marital funds to purchase a new residence, they will certainly not look favorably upon you utilizing further marital resources to furnish a new residence.
Be very careful when considering the ramifications and consequences of purchasing a new residence during a divorce. It’s also wise to consider your cash flow when making this type of decision. Even if you’ve weighed the pros and cons and decided to purchase a residence anyway, and even if you’re able to get by without spending much money to furnish it, don’t forget the other expenses involved with owning a house. You’re going to have insurance premiums, utilities, property taxes, and maybe even HOA fees. These are on top of the same expenses that must be paid on the residence you just left. Do not underestimate the often-crushing expense of having to maintain two households instead of one. It’s not always the purchase itself that leads to problems financially.
Whether there is divorce in your future or you need to respond to a divorce filing by your wife, I am here to advise. Contact me today.