Let’s say that you have decided to get married but you already own a house (that isn’t fully paid for). What can and should you do to keep that house as your separate property after you get married?
There are a few things to consider. Since you took title to the home prior to marriage you most likely own it in your name as a single or unmarried person. That is a helpful start, but the analysis does not end there.
All payments made and equity accumulated prior to your marriage are your sole and separate property. To evidence that fact, shortly after your wedding you should have your new spouse sign what is called a disclaimer deed and record the signed and notarized disclaimer deed with the County Recorder’s office in the county where the property is located. When I say shortly after the wedding, I suggest within 90 days after the wedding. Now, obviously, it is a good idea to have a conversation with your fiancé prior to the wedding, letting him/her know that you will want him/her to sign a disclaimer deed for your house. It’s never a good start to a marriage to put surprise legal documents in front of someone and ask them to sign.
So, the first thing you do is talk to your fiancé, BEFORE THE WEDDING, about your wanting to keep your house as your separate property. Tell him/her that after the wedding you will be asking him/her to sign a disclaimer deed that will get recorded. After the wedding have your new spouse sign, record the disclaimer deed with the recorder’s office and just when you think you are done and it’s all taken care of – wait, there’s more…
The disclaimer deed evidences the fact that all payments and equity made prior to signing belong to the spouse that originally purchased the house. What about payments made going forward, meaning after the wedding and after the recording of the disclaimer deed? If you have the financial resources to make the mortgage, insurance, property tax, HOA, etc. payments out of funds that are your sole and separate property – you are set! There will be no question about the ownership or equity allocation in the event of a divorce, annulment or legal separation.
If, like most of the population, you need to use money from your paycheck to make the above mentioned payments on the house – then you start to run into trouble again, because with each payment made from your paycheck you begin to create an interest for your new spouse in your sole and separate home. Here’s why, Arizona is a community property state – each and every paycheck you earn after your wedding is, by law, community property. One half of the paycheck belongs to you and the other half belongs to your new spouse. So, when you use money from your paycheck to make the mortgage and other payments, you are using money that legally belongs to your new spouse; if you end up facing a divorce, your spouse will claim that he/she has a community lien on the house that entitles him/her to money from your house. The easiest way to avoid creating a community lien is to use sole and separate money to pay for the house. Unfortunately, that isn’t an option for most people.
The way to avoid a community lien claim in this situation is by signing a Prenuptial Agreement prior to your wedding, detailing your intentions and agreements with regard to your assets and liabilities both before, during and after marriage.
Real estate transactions can be complicated. Back east, lawyers are required for all real estate transactions. Out here in the wild, wild west, you are not required to have a lawyer to complete a real estate transaction; however, we strongly encourage you to consult with a lawyer regarding the above issues or hire a lawyer to handle it for you.