This FAQ explains what to do when a third party owns a portion of an asset.
This typically can apply with real estate, where, for example, a party’s parents own a portion of the property.
It can also apply with a business, where, for example, there are partners who own a portion of the business.
Here are the steps to take to recognize this situation in Family Law Software.
- Determine the value of the third party’s interest.
- Subtract that from the total value of the property.
- Enter the net value in Family Law Software as the “value” of the property. So you are entering in Family Law Software just the portion of value owned by the parties.
- Footnote the fact that a third part owns a portion of the property, the third party’s share, and the total value.
For example:
- Suppose one party’s parents contributed a $40,000 down-payment on a home that cost $400,000.
- Suppose the home is now worth $500,000.
Because the parents contributed $40,000 of a $400,000 initial value, they would typically own 10% of the value of the home. (The parties may have another agreement. The key thing is to find the share of ownership of the parties and the share owned by the parents.)
Let’s continue with our example, assuming that the parents own 10% of the value of the home. That 10% is now worth $50,000.
You would enter as the value of the real estate $500,000 – $50,000 = $450,000.
Assuming that the parties are responsible for the mortgage, you would enter the full mortgage value. (If not, enter the portion of the mortgage for which the parties are responsible.)
You would enter a footnote explaining that the property is worth $500,000 but that $50,000 is owned by a third party.
If the asset is a business, you follow the same steps:
- Figure the percent owned by the other party (or parties).
- Calculate the amount of value owned by the other party (or parties).
- Subtract that value from the total value.
- Enter the remainder, which is the amount owned by the parties, as the “value” of the business.
The amount you want to enter in Family Law Software is only the amount owned by the parties, and any debt or mortgage against the property should be only that for which the parties are responsible.