Celebs Kelly & Brandon; and Katie & Tom: The House is Whose?
One of the hardest assets to deal with is the house. And when you’re a celebrity, you probably have an expensive home, maybe several of them. Our two celebrity divorces for Episode 180 on THE Amicable Divorce Expert podcast are Kelly Clarkson, winner of American Idol, Grammy Award-Winning singer, and talk show host, and her music manger former husband (divorce final in September of last year) Brandon Blackstock; and Katie Maloney & Tom Schwartz of Vanderpump Rules, Sur Restaurant and Tom Tom restaurant & nightclub. Real estate was part of their divorce and our topic for today.
Real estate is most times the most valuable asset people have, and the hardest asset to move forward, in many cases. It’s emotional and financial. The emotions come with the memories of raising the family there, or just the emotion that accompanies change. Emotions drive the initial decision. Then logic sets in. Or not. It just gets crazier, more complicated and back to emotional until everyone calms down and looks at the numbers. Numbers in and of themselves have no emotion, but they do have a reality that will triumph.
Let’s look at Katie Maloney and Tom Schwartz first. They had a very amicable split and mutual decision on selling the house. Katie was quoted in US Weekly saying that the decision was, in fact emotional at first, but then she went through the numbers to see if it was financially feasible for her to keep the house, and that logic became her determining factor to sell the house. It was too much of a financial burden for her to keep it and pay for everything herself, even with her cast member fee with Bravo for the reality show Vanderpump Rules. Tom Schwartz apparently agreed that selling the house was the better decision.
Now let’s look at a more complicated situation, Kelly Clarkson and Brandon Blackstock. Many celebrities invest in real estate. It’s safer and more lucrative than stocks, typically. It’s also a tangible asset, which means that failing a flood, hurricane or fire, you always know how the asset is doing, and the volatility in the real estate market is far less than the volatility in stocks. There was a pre-nuptial agreement, and this one piece of property, a ranch in Montana, was solely Kelly’s in the pre-nup. But Brandon, as so many spouses do at the time of divorce, wanted to contest the pre-nup as far as the community property status of the Montana Ranch was concerned. No contest; it went to Kelly.
Here’s what happens with most divorces when the house is the largest asset and some complicated situations arise:
- There are children, Mom wants to stay in the house, but can’t afford it.
- Other spouse can continue to pay for the house until Mom can make more money and refinance the house in her name to buy the other spouse out.
- Child and spousal support may not be enough for the loan-to-value ratio needed for a mortgage and either the house will be sold, or the former spouse can continue to pay a portion of the mortgage and make the house a mutual investment to sell later and divide even more equity – hopefully.
- Mom will have to earn more money to be able to get a loan and refinance the house in her name and give former spouse his/her equity share.
- One spouse doesn’t want to get divorced, is addicted to drugs or alcohol, and won’t sign the paperwork to put the house on the market.
- You’ll need a lawyer to discuss how this works in your state.
- In California, you can request a Hearing and request the court to order the house to be sold and sign the paperwork if the addicted spouse can’t. or won’t
- The community property value isn’t either agreed upon, or even that it is community property.
- It was owned by one spouse prior to the marriage, and the other spouse wasn’t put on the Title. Legal advice is needed to see if it matters that both spouses aren’t on Title. There are other factors that come into play to determine if the house is part community and part separate property.
- It was owned by one spouse prior to the marriage and the other spouse paid part of the mortgage, property taxes, or made some improvements to the property. Legal advice will explain how community property is created in your state. In California, the monies spouses make on their jobs from date of marriage to date of separation are community property dollars, and when spent on things used by both spouses, like paying the mortgage on a house, creates community property.
- The house was owned by one spouse during the marriage and that spouse had a separate source of money that existed prior to the marriage that was used to pay mortgage, property taxes, or improvements. Definitely need legal advice. Perhaps the house remains separate property, but the operative word is “perhaps”.
- There is a pre-nup that clearly states the house isn’t community property but the mortgage was paid for with community property money.
- Ask a lawyer for legal advice.
- What does the pre-nup say about using community funds for the house? This is key in determining whether community property was inadvertently created with the house.
- Sell the house and reinvest the money. Clean, simple, easy. If there is enough money for each spouse to buy something else with their equity share, you’ve hit the jackpot!
- The house is under water, meaning the mortgage is more than the equity in the house.
- A short sale still requires the sellers to make up the difference in what the house sold for and what the current owners owe the bank.
- Keep the house, continue to share the expenses, and sell it when there is no cash outlay from the sellers to move the property forward.
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