On June 4th, 2020, the original American Idol Kelly Clarkson filed for divorce from her husband, Brandon Blackstock. Clarkson, whose net worth is around $45 million, and Blackstock, valued at $5 million, had three homes between them at the start of the year. While the details of the divorce have yet to be finalized, the couple listed their Encino home for nearly $10 million earlier this year.
In most divorces, let alone those with millions of dollars in property on the line, dividing real estate can be deeply contentious. Homes can make up a significant percentage of the total assets in the relationship, but they are also a lodestone for all sorts of emotions and memories.
In this post, we will examine several of the factors at play when it comes to dividing real estate in high asset divorces:
- Prenuptial agreements
- Potential non-marital property
High Value Property and Prenups
In high-asset relationships, a prenuptial agreement can make all the difference. These agreements typically protect non-marital assets in the case of a divorce. Real estate purchased prior to a marriage can be kept entirely separate from the assets affected by the divorce.
Prenups can also dictate the division of marital property in a divorce. Specifically, couples can carve out separate property from marital property, then determine how the common property assets will be split in the event of a divorce. In the Clarkson-Blackstock divorce, for example, any prenuptial agreement would likely have guaranteed that Clarkson’s music earnings remained her sole property, while proceeds from the sale of a home might be split 50/50.
Prenuptial agreements, while important in high-asset situations, are not always bulletproof. There are many reasons a prenup might be challenged. One major reason for successfully challenged prenups is a lack of independent counsel. Many courts will ignore prenuptial agreements when one party did not have their own attorney inspect the contract.
Deciding Whether to Keep or Sell Real Estate in High Asset Divorces
If there’s no prenup, or if a piece of real estate was not included in the agreement, then more avenues for division open up. Fundamentally, there’s a decision for the separating couple to make: should they keep the property or sell it?
Selling the property simplifies things nicely. Neither spouse retains ownership of the property, and a set amount of money results from the sale. This money can then be divided with the rest of the marital property, however that is decided.
In Clarkson’s case, the couple put two of their homes up for sale earlier this year. Since the homes were purchased during the marriage, the homes are considered marital property. One could theorize that the couple knew a divorce was on the horizon and chose the simplest option for asset division.
Keeping the property is more complex. Sharing ownership might be possible in amicable divorces, especially of properties like vacation homes. On the other hand, primary residences may not be possible to fairly split. In that case, one party might buy out the other’s interest in the property. This requires both parties to agree on who should receive the property, which may not be a simple discussion.
your team at Kaspar & Lugay is ready to help you explore your options and develop a winning strategy.
The Importance of Appraisals
Regardless of whether couples decided to keep or sell real estate in a divorce, it’s critical to get an appraisal. In many marriages, real estate represents the most significant portion of marital assets. A fresh appraisal, after the decision to separate, helps define what the couple is dividing in the first place.
High-value homes are investments as much as they are places to live, so putting a reliable dollar value on that asset is critical to dividing property in a divorce. Here are some rules of thumb to abide by for property appraisals:
Use the Right Appraisal Service
Most appraisals are based on comparable homes in the area. When an appraiser is deciding on a home’s fair market value, they look at other recent home sales nearby. However, not all appraisal services are made equal. Different appraisers focus on different property types. When you’re looking to get a high-value home appraised, it’s important to work with an appraisal service dedicated to those types of properties.
High-value homes are in many ways part of a national home market, instead of local or regional. Appraisals for these properties should take this into account. Appraisal services dedicated to high-value homes the resources to find comparable homes around the nation, instead of merely nearby. That will lead to a clearer understanding of the home’s true value to the separating couple’s financial situation.
Consider Potential Future Value
The Value of Objectivity in High Asset Divorces
Deciding how to split a high-value piece of real estate in a divorce can turn even amicable splits into acrimonious, drawn-out proceedings that are a waste of time and money. That’s why reaching out to qualified attorney with experience in asset division can make all the difference.
An experienced divorce attorney can help you find a fair way to divide high value real estate in your divorce. Whether you decide to maintain your California home or sell it like Clarkson and Blackstock, having an attorney with your best interests in mind will keep things equitable for both of you. They will be less caught up in the little details and more able to focus on helping you receive your fair share of marital assets.