In any separation, one of the most difficult issues to address is the marital residence. Whether secured by a mortgage or owned free-and-clear, the home typically represents the most valuable asset owned by a couple. In this buyer’s market, it can be difficult (if not impossible) to simply sell a house and split the profits. Sometimes, the parties want one parent to stay in the house until their kids finish school to avoid pulling them from their childhood home. In other cases, there simply may be no realistic way to sell the house for a profit. This reality often leads parties to consider continuing jointly owning their house beyond their separation and divorce, whether that is for two, five, or even ten years.
While on its face this approach seems practical, deciding to retain joint ownership over the marital residence after divorce carries significant risks of which neither party may be aware. The source of these risks is the “special” type of joint ownership available to spouses under Virginia law: ownership as “tenants by the entirety,” also known as ownership “as husband and wife.”
Historically, when a man and wife were married a new legal entity was created. The “married couple” was treated as a single individual that possessed its own rights and obligations. In modern times the belief that a married couple is a separate entity has largely been abandoned. However, in Virginia a married couple may still choose to jointly own property as a single legal entity.
Section 55-20.2 of the Virginia Code grants a husband and wife the special joint ownership rights of tenancy by the entirety. Joint ownership through tenancy by the entirety provides a married couple with some significant advantages, including the automatic transfer of ownership to the other spouse upon death without the need for additional estate planning documents (wills, trusts, etc.). Possibly the greatest benefit deals with creditor rights: the property owned through tenancy by the entirety is completely immune from any creditor of only one spouse. For example, if you owe $10,000 in unpaid medical bills in your name alone, any judgment entered against you individually for those debts cannot be attached to your marital residence if you own it as husband and wife. The only way a judgment can attach to property owned through tenancy by the entirety is if the debt in question is jointly owed to the creditor.
This protection through joint ownership, however, evaporates upon divorce. If you are no longer married you can still jointly own property together, but you cannot jointly own property through tenancy by the entirety. Once your divorce is final, all of your creditors (and, more importantly, all of your former spouse’s creditors) can attach judgments to your home. The real danger, however, is this: you will have no control over judgments against your former spouse, and you will have no way of stopping them from attaching to the home. In many cases, you may not even know that a judgment against your former spouse has been entered and attached to the property.
These judgments become a major problem when former spouses get two, five, or ten years down the road and are ready to sell the house because virtually any buyer, lender, or title insurance company will require that all judgments be paid as a condition of sale. In some cases this may simply mean you get less net proceeds from the sale, but in many (if not most) cases this could mean no profits at all. In the worst case scenario, the list of judgments could be so large that you would not be able to sell the house at all!
With careful planning, a skilled attorney can help minimize these dangers, or even help you avoid them altogether. The family lawyers at Livesay & Myers, P.C., are experienced in addressing these issues and any other issues that may arise in your divorce or separation, and represent clients in Fairfax, Alexandria, Arlington, Manassas, Woodbridge, Stafford, Spotsylvania, Fredericksburg and all of Northern Virginia. Contact us to schedule a consultation today.