Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to [email protected].
Question from WildCat in CA: Hi Brian, I’ve been with Sierra for three years and we’ve decided to get married. At first, I was incredibly excited about this but after a few days, I started thinking about some of the implications. In particular, I thought about how marriage will affect our finances. I know that it’s not romantic but in many ways it seems like getting married can really mess up a couple’s finances. I have one big example that I’m asking for your help with. Sierra took out a mortgage to buy her parents a house a couple of years ago. She didn’t just co-sign for the mortgage, the mortgage is only in her name. Her parents pay a small portion towards the mortgage each month, but Sierra pays the bulk of the payment. So, here is my question. If we get married, will I become responsible for the mortgage on her parent’s house? I haven’t even talked to Sierra about this because I’m afraid it could destroy what has been a great relationship up until we started talking about getting married.
Answer: Hello WildCat. That’s a tough question that you’re asking. My first thought was that you could try writing your situation into some type of a prenuptial agreement and that is when I realized how important it is for you to get a knowledgeable attorney involved (I’m not an attorney). In my opinion, this goes beyond just general legal advice because there are so many possible variations involved. For instance, it could get in the way of the two of you buying a house if you don’t already have one. Or what could be the consequences if she defaults on the mortgage or even has to declare bankruptcy? Another complicated possibility is what happens if there is a divorce? Would you still be responsible for Sierra’s parent’s mortgage if you were no longer married to Sierra? Importantly, the laws vary drastically from state to state.
I understand why you are reluctant to talk to Sierra about this, there is nothing romantic about marrying someone else’s debt. The best I can offer are some broad and general thoughts about the possibilities of what it does mean when you marry someone else’s debt. California is a community property state, so I’m going to lean towards what this could mean in community property states.
If you live in a community property state, most debts incurred after marriage will be treated as the responsibility of both spouses. Nine states have community property laws:
There are many reasons why it’s important to understand who and when individuals are responsible for the other one’s debt after you get married. For the most part, this becomes important if the debt goes into default.
When a debt is held by just one person in a community property state. My thought is this is why you might want to consider structuring Sierra’s parent’s mortgage in a prenuptial agreement (but talk to a lawyer first). Creditors could seek to attach jointly held assets to recover what's owed. Debt recovery may include bank accounts and any real property you own, such as a home, land, or vehicle. So even though you may not have been directly responsible for the debt, you'd still be on the hook for repaying it if your spouse defaults.
Joint accounts or co-signing for each other’s debt. When both names are on an account, late or nonpayment will impact the credit score of both people. Additionally, you can both be sued for a defaulted debt regardless if you live in a community property or common law state.
Debt and divorce in a community property state. WildCat, this might get you out of your biggest fear of marriage. But again, talk to a knowledgeable attorney. The debts you individually brought into the marriage should remain your own. However, debts taken on after the marriage should be divided equally between you — depending on the divorce laws in your state. In common law states, divorce courts typically follow an equitable distribution rule, meaning it's up to the court to decide how marital debts should be split.
WildCat, this is intended to help you understand your concerns, but you didn’t mention what debt you are bringing to the marriage. After all, marriage is a two-way street. Are you bringing student loans or a big credit card debt into the marriage? What are your financial goals? Are you trying to pay off debt so you can buy your own home or are you saving for retirement? It's a good idea to talk with your partner about your financial situation before getting married. That way you both understand how much debt you have as a couple and who's responsible for which debt.
What can you add to this conversation about debt and marriage? Please comment.
Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to [email protected].