A Ticking Time Bomb Post-Divorce?
August 15, 2017 § 4 Comments
We’ve all seen literally hundreds of divorce agreements that include language that goes something like this:
Husband shall have exclusive use, occupancy and possession of the former marital residence, and he shall be solely responsible to pay in due course and keep current the mortgage debt, taxes, hazard insurance, and maintenance expenses of the property, and to indemnify Wife and hold her harmless therefor. The former marital residence shall be sold not later than one year from the date of this agreement, and the proceeds shall be divided equally between the parties, after the expenses of sale are paid. If the property has not been sold to a willing and able purchaser within the time stated …
Let’s stop right there. Most marital residences nowadays are in joint tenancy with right of survivorship (JTWROS). If one tenant predeceases the other, the survivor owns the property outright. So, in the example above, if Husband predeceases Wife before the property is sold, what is supposed to be done?
Does Wife own it outright, with no claim by Husband’s estate to any part of the equity? I think Wife would have a good argument that this is the result that they intended because they both well knew how survivorship operates, and the absence of any language to the contrary connotes their intent to follow its usual operation.
Or is Wife obligated to sell and pay Husband’s estate his share of the equity? Husband’s estate would argue the clear intent of the parties to divide the equity, and that Wife would be unjustly enriched by an opposite result.
The agreement doesn’t tell us what to do. What will happen is that someone will file suit, discovery will be had, a trial will ensue, and an appeal may be taken, and after several years and a basketful of money, the matter will be decided by others rather than the original parties.
It seems to me that this could be avoided one of two ways:
One, language could be added to address specifically the eventuality of survivorship.
Two, and in my opinion better, the parties could agree to re-convey the property to themselves as cotenants.
Whatever solution you choose, this is another among many examples of how a little thought and effort can save your clients from an unanticipated and unwanted eventuality.
Note that this applies only to JTWROS. If the parties own the property as tenants by the entirety (which is becoming more prevalent among professionals, due to the shelter it provides against judgment creditors), divorce converts it to tenancy in common.
As you can see from the comments, my statement above that tenancy by the entirety is converted by divorce to tenancy in common is incorrect. The MSSC in 1976 held that divorce converts entirety to joint tenancy with right of survivorship. Shepherd v. Shepherd, 336 So.2d 497, 499 (Miss. 1976). Mississippi is one of the only states that so holds; imagine that.
Thanks to the commenters and Attorney Leonard Cobb.