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Who keeps the investment property?

| Jan 23, 2021 | High-net Worth Divorce |

Owning an investment property remains one of the top ways to build and grow your wealth. It comes as no surprise that you might feel inclined to keep this for yourself. This is especially the case if you manage this business without your spouse or this serves as your main source of income. 

The bad news is that because California is a community property state, you may need to share your property. The good news is that other factors may invalidate the need for this. If you own more than one, when you bought each property might also make a difference. 

What is a community property state?

In California and a handful of other American states, when you marry, the assets and debts you acquire become community property. This means the assets and debts belong to both parties with few exceptions. Then, if the couple divorces, California splits assets 50/50 as best as possible. 

Who owns the rental property?

SFGATE explains that if you bought the rental property during your marriage, it likely falls into the category of community property. This may remain so even if you never added your spouse’s name to the deed and your spouse had no involvement in your investment property business. A prenuptial or postnuptial agreement may change this. 

However, if you purchased the property before the marriage, the court may not classify it as community property. Another instance when this happens is if you inherited the investment property directly from someone else, such as a sibling or parent. If you use money inherited in the same manner to purchase the property, you may also build a case on the same principle. 

If the courts determine you alone own your investment property, you may keep, sell or manage it as you see fit. However, in cases where it becomes community property, you may either become co-owners or sell and split proceeds at 50/50. You may also have the opportunity to buy out your spouse. Your spouse might even accept another asset in place of the investment property, such as the family home.