Disclaimer: This article does not constitute legal advice. If you have any questions about your individual situation it is best to seek the advice of an experienced legal professional.
When couples with international connections go through a divorce, the process often involves the division of international properties. While the divorce proceedings may take place in a specific US state, the property division in divorce must take into account assets located outside the country.
One of the most challenging assets to divide in an international divorce is real estate. Unlike cash assets or investments, real estate requires a meticulous appraisal process due to varying local market conditions. Emotional attachments to properties, such as primary residences, vacation homes, or family getaways, can make financial decisions during the divorce more complicated. Additionally, international real estate involves complex tax implications, influenced by property locations and the residency or citizenship status of both spouses.
If you are navigating an international divorce and own foreign real estate, here are a few of the most important things to consider before embarking on the process:
International Appraisal of Foreign Real Estate
Dividing international real estate necessitates valuation by a skilled appraiser with expertise in local market conditions. In international divorce mediation, both spouses can avoid conflict by agreeing to hire a single appraiser who provides a unified assessment of the property’s value. This approach reduces disruption compared to a traditional adversarial divorce, where separate appraisers often offer competing valuations.
Tax Impacts of International Real Estate
Owning multiple properties in different countries can lead to complex tax implications. Many countries, including the US, levy taxes on foreign interest in real estate. Non-US citizens or residents may face additional taxes on their foreign properties. Transferring a US property to a non-US resident or citizen spouse during divorce can result in the loss of the tax exemption for real estate transferred incident to divorce, leading to capital gains taxes. To mitigate these losses, strategies such as transferring properties as gifts during marriage or exploring tax treaties and exemptions may be necessary. Working with international divorce and tax experts is crucial to assess the full tax impact of international properties and make informed decisions.
Determining Marital Property Status
In some cases, spouses may receive real estate as a gift from family or acquire property before the marriage. In such situations, the value of the property might need to be excluded from the marital estate. A skilled divorce mediator can assist in evaluating these circumstances and determining what should be included in the marital estate.
International Property Tax and Maintenance Expenses
For individuals who own multiple properties across borders, considering the costs of maintenance, property taxes, and other taxes is vital. Understanding which spouse has paid for maintenance or property taxes and how these expenses impact the property’s value is a crucial part of the analysis. especially in the case of rental properties.
People with ties to other countries often hold executive positions or retain investments that require them to travel frequently or reside in multiple countries. When dividing real estate in divorce, it is essential to consider the legal status of the spouses, as it significantly impacts the tax implications of the properties. Understanding how the property was acquired and owned is equally important in determining its status as marital property. Different countries may have varying rules about property ownership and title. Divorcing couples with properties in multiple locations should seek assistance from divorce professionals specializing in international property division.
International Divorce Mediation
At Santa Clara Divorce Mediators, we understand the complexities of divorce involving foreign real estate and have experience assisting couples with significant assets that require international property division. Whether you are based in multiple countries or relocating during divorce, our non-adversarial and comprehensive international divorce mediation services streamline your divorce so the form-driven process is manageable and transparent. Our approach ensures a thorough assessment of your community property and explores fair and intelligent property division options. Our divorce firm can handle all aspects of your divorce, including paperwork, and we offer the convenience of remote mediation, which allows you to navigate the divorce process from any location. Should you prefer an in-person meeting, we have offices in San Diego, CA, Silicon Valley, and Berkeley, CA. Contact us today to learn more about our international divorce mediation services.