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Division of Depreciated Assets during a New Mexico DivorceWhen parties seek a divorce in New Mexico, the court will address the division of property and debts based on New Mexico community property principles. In broad terms, this means that most assets acquired during the marriage or that were maintained with investment of community property funds will be divided equally between the parties. This does not literally mean that both spouses will receive a half interest in each marital asset as this sort of approach would be logistically unworkable.

The judge essentially will create a theoretical balance sheet that may assign different assets or debts to each party and divide the interest in other assets. This balance sheet also includes who is assigned responsibility for community debts. The net balance for each spouse will generally be equal with the proviso that there may be negotiated deviations for concessions on alimony. A significant complication arises in this process when dealing with assets that have depreciated in value during the marriage, such as a retirement account, residence, or other asset that may have lost significant value in a weak economy.

Our New Mexico Attorneys have provided strategies for handling depreciated assets when dividing assets during a divorce. We are using real estate as an example of the depreciated asset, and different types of assets may need to be handled differently so it is advisable to seek legal advice.

Deferred Sale of the Asset:

If the asset is land, residential property, or commercial real estate, the asset can be held until a future date when the economy recovers and the market value for the asset rises to the point that a sale becomes financially prudent. One of the parties can agree to reside in the house and cover maintenance costs and mortgage payments, or the property can be used as an income producing property. Based on how these issues are addressed, one of the parties may be entitled to an equalization payment when the property is eventually sold. Although this strategy can be an effective way to ensure that both parties receive the maximum financial benefit from the asset, logistical problems can arise if neither party is willing or able to pay the mortgage, taxes, and cost of maintenance. These are important issues, so it is important that any marital settlement agreement (MSA) or judgment clearly spell out these responsibilities.

Assuming Responsibility for the Asset:

Another option is to allow one of the parties to keep the asset along with financial obligations associated with keeping the property. If the asset has lost some value due to bad market conditions but still has some equity, the party keeping the asset can buy out the other spouse. While a house or other real estate might theoretically be refinanced by the party that is going to be awarded the asset, the party may face difficulties in obtaining financing. This strategy can be risky for the spouse who is surrendering his or her interest in the asset because the mortgage company or taxing agencies might still pursue unpaid deficiencies against both parties.

Immediate Sale and Division of the Asset:

If the property has any equity, it can be sold immediately so that the net proceeds are divided between the parties. While this approach has the disadvantage of lost value because the real estate is being sold in a down market, the risk associated with defaults on mortgage payments and tax obligations are mitigated.

Why the Inability to Sell Your Home Does Not
Preclude a NM Divorce

The above information is designed solely to illustrate general principles of law, and does not constitute a specific legal opinion on individual cases. We suggest that you contact experienced legal counsel for a specific opinion tailored to your individual circumstances.

If you have questions about the division of assets and debts during a New Mexico divorce, Jay Goodman & Associates offers a free consultation in our centrally located offices in Santa Fe and Albuquerque during which we discuss your situation and answer your questions. Call us today to schedule your free consultation at (505) 989-8117 to learn about your rights and options.

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