In some divorces, there is “foreign” real estate within the total marital estate1. Typically, this falls into one of three categories: (1) a timeshare or some other similar factional ownership; (2) a home or property sited in another state; or (3) a home or property located in another country. Under the Indiana Divorce Act—Indiana’s body of law that guides judges in divorce proceedings—all such real property is subject to the jurisdiction of the divorce court and must be divided. This blog covers the unique legal concepts and issues related to “foreign” real property.
The most common type of marital asset is foreign property – this being a “time-share”. In their heyday, time-shares were a hard-to-resist purchase. Owners could vacation for certain weeks a year at their favorite location and save a significant amount of money over staying in hotels. However, the timeshare resale market is tight and competitive; but whether you use the time-share or not, owners must still pay the maintenance fees. For this reason, in many divorce cases, the argument is over who gets stuck with the time-share—no one uses it but the family has paid the fees to the time of the divorce.
With a divorce filing, the counsels may want to seek court permission to list and sell any time-share as-soon-as-possible. Every case is different, but the parties’ should discuss timeshare with their divorce counsel at the outset of the case to minimize the risk of being “awarded” the timeshare on divorce and being accountable for the associated fees. Not all time-shares lack marketability or are not desired by the parties. The point is to be aware of the time-share “trap” that may come with divorce.
The second type of real property is foreign real estate in other states. The most important consideration is obtaining an appraisal and hopefully agreeing to stipulate to its net value (mortgage and other liabilities minus fair market value). This seems simple, but not so fast! If the parties do not agree, then each party has to obtain an appraisal; however, the appraisal is inadmissible hearsay unless appraiser testifies to his or her report on value at the divorce trial; this can be a significant expense for travel and lodging for the expert for a party to bear, unless the court allows the appraiser(s) to testify by telephone.
In addition, many states have real estate laws that may be inconsistent with what an Indiana divorce judge may order, so a consult with a real estate attorney in another state may be required to prepare for trial and make the right presentation of evidence. If the law is complex or undeveloped, it may result in a Divorce Decree that causes litigation in its enforcement in the foreign state. This then means real estate counsel may have to testify at trial, creating the same issues as having an appraiser testify: a written report by the attorney from another state is inadmissible hearsay and cannot be admitted at the divorce trial without a stipulation or testimony.
Whatever the ultimate decision is by the trial court, the divorce decree is enforceable in any other (foreign) state in the United States. This is because the United States Constitution has the Supremacy Clause, which makes federal law supreme to state law; and this with the Constitution’s Full Faith and Credit Clause requires any other state to honor Indiana’s divorce judgments. Nevertheless, this may require legal work or litigation in the foreign state to fully effectuate the divorce decree to clear and make proper marketable title to the foreign real property post-divorce. Thus, the prudent litigant, through his or her attorney, researches this in advance to account for this contingency in the divorce trial.
Third, the most complex type of real property to address in a divorce proceeding is one that is located in another country. In some cases, this property was where one of the spouses previously lived. In fact, it is common for professionals on work visas (of various types) to meet a significant other and marry in the United States, only to later divorce. If the foreign home or property was brought into the marriage in this circumstance, there is a strong argument to be made that the division of the marital estate should be such that it becomes the sole property of the spouse who previously owned this foreign property before marriage.
However, Indiana is not a title theory state, meaning that no matter how a home or real estate may be titled or deeded in another country, it is subject to the Indiana divorce court’s jurisdiction and authority to divide on divorce.
This noted the valuation issues become that much harder where the property is located in a foreign country. Aside from overcoming the hearsay issues related to a valuation and real estate legal issues of title, there may be a different currency and language involved, requiring conversion to US dollars and translation of the appraisal document into English as well as translation of any appraiser’s testimony at the divorce trial. In these cases, divorce courts are more likely to exercise their discretion to allow experts to testify by phone and have their testimony translated in the courtroom by an approved translator.
This can also create trial issues where there are significant time changes or limited phone services. What if daytime in the foreign country is the middle of the night in Indiana?
Most significantly, while the divorce court has the authority to determine a value for the foreign real estate and award it in the divorce decree, the enforcement of an Indiana divorce decree may be difficult or impossible in a foreign country. Typically, at least two additional steps are necessary for enforcement. The first is consulting with foreign counsel about the form an Indiana divorce judgment must take to be enforceable in the jurisdiction where the real estate is located. The second step is related and that is determining the mechanism for enforcement. Is there an international treaty recognized between the US and the given foreign country or some other type of agreement to allow reciprocal enforcement of foreign final judgments? If not, does the law of the given country provide a mechanism for enforcement of an Indiana divorce decree through its statutory or case law?
Where there is no apparent remedy for enforcement of an Indiana divorce decree, this needs to be considered and placed in the evidence in the divorce court trial in order for the judge to consider to make a just and reasonable division of the marital estate. This allows the court to account for the fact its divorce decree may not be enforceable abroad and divide the marital estate accordingly.
Ultimately, “foreign” real estate brings in unique, complex considerations and requirements into a divorce case. If not fully developed and presented in the evidence, the net effective division of the marital estate by the judge ultimately may not be just and equitable because of an unenforceable judgment or one that requires significant litigation and corresponding costs to enforce. Know this and present it in the evidence! Failure to do so waives this concern or legal issue for future reconsideration or appeal.
This blog is written by attorneys at Dixon & Moseley, P.C. who handles complex divorce cases throughout Indiana, including those with international real property and custody elements. This blog is intended for general educational and informational purposes only. It is not intended as specific legal advice or a solicitation for services. It is an advertisement.