Splitting escrow upon divorce and house buy-out.

July 16, 2012 7:35 AM

I bought my house from my wife. We got our escrow refund check in the mail. I think it's rightly mine. She disagrees. Details inside...

My wife and I are divorcing. I bought the house from her, paying her 1/2 of our shared equity based upon a professional appraisal. Upon closing, an escrow refund was sent. I feel as though I'm entitled to this full amount, as I am responsible for paying the taxes. My wife, who I have allowed to stay and pay rent for the past 6 months), thinks she should get half. It's over $4,000, not a trivial amount of money.

Am I out of line in pushing to keep this money?

posted by anonymous to work & money (11 answers total)

The escrow check is a refund from the joint mortgage that was held by you and your wife prior to the sale. As such it should be split by the two of you unless some other arrangement has been made.
posted by alms at 7:38 AM on July 16, 2012 [21 favorites]

Technically the escrow is for the former owners, so she would be entitled to half. If you bought the house from a stranger, they would get the whole check and you'd still have to pay the taxes.

Put the money away in a separate bank account and address it in the divorce.
posted by Ruthless Bunny at 7:38 AM on July 16, 2012 [1 favorite]

If you were to buy the house from a stranger, you would not have received that escrow check. The escrow was built when you were married and should be shared unless it was agreed upon during divorce negotiations that you were to have the full escrow amount.
posted by Yellow at 7:41 AM on July 16, 2012 [3 favorites]

Do you want to slow this whole process over $2000? Consider it a hidden one-time fee on a clean break and be done with the whole thing.
posted by Inspector.Gadget at 7:43 AM on July 16, 2012 [3 favorites]

This is something for your lawyers to hash out, at a rate of what, $200 an hour? Or you could let it go. Your choice.
posted by the young rope-rider at 7:43 AM on July 16, 2012 [1 favorite]

Dude. Ask your lawyer. That's what you pay him for.
posted by valkyryn at 7:57 AM on July 16, 2012 [3 favorites]

I am not a lawyer, but I can't imagine how any legal theory would be justification for your position here. The escrow money represents your joint interest in the property. The fact that you have to pay 100% of the taxes on the house going forward (as the new sole owner) has nothing to do with it. The other two people who previously owned the house get the escrow (you and your ex). So think of you (now) as a different person from you (when you owned jointly with your wife). So it seems like she is right. Give her the $2000.
posted by Seymour Zamboni at 8:19 AM on July 16, 2012

Something else to consider: when you bought out your wife's equity on the house, were adjustments done on the property taxes already paid as of the date of closing? Because you actually owe her half of that amount as well.

Where I live, the county tax year runs from January 1 to December 31, due at the end of January. If you paid it in January but close on July 1, you would owe her 1/2 of the amount already paid for July 1 - December 31.

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*I am not a lawyer, I'm a paralegal who does real estate and matrimonial work.
posted by Lucinda at 8:27 AM on July 16, 2012

I would give her half of what's left over after subtracting taxes only if the house was in her possession during the time taxes would be applied (as that's usually the intention of keeping money in escrow...to pay for taxes and insurance.) So factor that value out fairly, as some of it may be money that should already be considered spent. Working out the actual amount with lawyer would be best however, as others have mentioned.
posted by samsara at 8:30 AM on July 16, 2012

For the last tax year of my marriage, I ended up with an amended W2 that resulted in a refund. Half of it went to my ex because it was a joint return even though it was my job and my W2 that resulted in the additional refund.

I considered it a "get out of jail fee" and recommend you do the same with the escrow. You could spend $2K in attorney fees between pushing for this cash and the additional fighting resulting from hard feelings about you trying to keep the money.
posted by immlass at 8:30 AM on July 16, 2012

I would give her half of what's left over after subtracting taxes only if the house was in her possession during the time taxes would be applied (as that's usually the intention of keeping money in escrow...to pay for taxes and insurance.)

This is how our office would've handled it at transfer, in our jurisdiction:

Example: Closing date of August 15, 2012:

County taxes (Run from 1/1/12 to 12/31/12, paid in January 2012): OP's wife is owed one half of the amount paid from August 16, 2012 to December 31, 2012, because she has paid for time she will not live there.

School taxes (run from 7/1/12 to 6/30/13 but not due until September 2012, not paid): OP's wife must pay one half of the amount due from 7/1/12 to 8/15/12. OP would then pay the full amount due in September when the bill comes.

(Any household insurance premium paid would work the same way, depending on when it is paid and when the premium year is.)

The mortgage company has $X amount they are holding for taxes that have not been paid yet, but all the adjustment for who owes what money has already been taken care of (through the adjustments just mentioned).

So, at this point, the $X held by the mortgage company is essentially a savings account into which both OP and his wife have paid half, so she's owed half of it.

Long story short, in order to properly answer this we need to know how the transfer was andled and how the tax years run in OP's jurisdiction.

So, ask your lawyer.
posted by Lucinda at 8:49 AM on July 16, 2012 [1 favorite]