Division of Property Rights When Spouses Own Investment Properties

There are many different types of investment properties that earn an income: rental properties, condos, apartments, stocks, and many other types of real and personal property. Some of the investments provide a little extra cash for the owners. Other investments provide a livelihood. Some require extensive management such as making repairs and collecting rents. Other investments only require watching the value of the investment to determine the best time to sell.

When spouses who are divorcing own investments, there are many decisions that have to be made – either by the spouses, through negotiation by the spouse’s lawyers, or by a family law judge. Some of these decisions involve:

• Should the investment be sold and the proceeds distributed?
• Can one spouse buy out the other spouse’s interest?
• How is the value of the investment determined?
• Who will manage the investment?

In Tennessee, the division of investment property is determined by the laws of equitable distribution. A few initial questions that your Franklin divorce lawyer will review are:

• Is the investment property marital property? Generally, any property that the spouses owned prior to the marriage is considered separate property. Any property acquired during the marriage is considered marital property. In addition, any increase in value of property (such as investment property) is considered marital property even if the base amount is considered separate property. The family court has the right to divide only marital property.
• Is there a prenuptial agreement? A prenuptial agreement generally applies to property that the spouse owned before the marriage. It could also apply to property that is acquired during the marriage. Generally, a prenuptial agreement controls the distribution of covered investment properties unless fraud or duress was involved.
• Do you want to keep the investment because it provides an income? It doesn’t matter how the investment property is titled. If your husband’s or wife’s investment property is marital property, then you are entitled to an equitable share. An equitable share may be just 50% but it could be more; it could be less. If you and your spouse want to keep the investment property, then:
  • You need to decide who is getting to manage he property
  • How much each person will get as the investments mature – ex. Rental payments or stock dividends
  • What will ultimately happen when the investment is sold
• Are you willing to buy out your spouse’s share? If you want to keep the investment (usually because it was your idea or you managed it), you have the right to buy out your spouse’s share.
• Are you willing to accept current or future proceeds in compensation for selling your share? If you don’t want the investment but your spouse does, then your spouse has the right to buy out your equitable interest in the investment (which, again, may be more than 50%).
• Do both spouses want to sell the investment? For many reasons, the spouses may just want to cash in the investment and move on with their separate lives.

How an experienced Franklin divorce lawyer can help

Regardless of which type of action you want to do (keep the investment, buy out or sell an interest, or sell the investment), you’re going to need an attorney’s help. We can assist with:

• Valuing the investment. This is one area where spouses definitely need the help of experienced Columbia family lawyers. An experienced lawyer will work with professional appraisers, will request documentation such as profit and loss statements or earnings statements, and will conduct discovery to determine the proper and full value of the investment.
• Determining how much you are entitled to receive. The percent you will be awarded depends on many factors such as the income and earning power of the spouses, the value of the marital property, the age and health of the parties, any prior agreements. The amount of alimony and child support agreements may also be a factor.
• Creating a buyout agreement. If you want to buy out your spouse’s share, there are creative ways to conduct the buyout, such as agreeing to waive an interest in your spouse’s retirement account up to the value of the investment asset.

Additional investment divorce factors depend on the nature of the investment.

Don’t sell or buy an investment property on your own if you are going through a divorce. There are many factors that determine what percentage share you are entitled to, what the value of the investment is, and how the buy-out or sale should be handled. At the Law Offices of Adrian H. Altshuler & Associates, our family lawyers understand the range of issues that apply to investment properties and divorce. We have been advising spouse since 1991. Clients can see us in Franklin, Columbia, and Brentwood. Please call our office at 615-977-9370 or fill out our contact form to make an appointment.