FREE Residential building divided by a dotted line into four equal parts

Married couples often utilize their marital funds for investing in future sources of income. One of the most common ways this is done is through purchasing rental properties. However, if that couple gets divorced, the division of the rental properties can be a complex process to navigate. The division and distribution of the rental properties involves the same procedure as dividing all other marital property would.

The parties will first need to agree on the fair market value of the property or properties. This can be done by simply negotiating and reaching an agreement on the property value between the ex-spouses or by using a professional appraiser to assess the property’s fair market value. While the parties may agree on an arbitrary value, it is usually better to have a professional appraisal of the property. It prevents either spouse from manipulating the other should one spouse be unfamiliar with the market value of the real estate. Getting a written professional opinion alleviates this issue and makes the equitable distribution process smoother. In addition, appraisers will help determine whether the property is an asset, liability, source of income, or a combination of these. Determining how the property is valued will aid your lawyers in reaching the best agreement on how the properties or their liquidated value should be distributed.

The parties will then have to agree on how to fairly divide the property. Many couples handle this issue by one spouse keeping the rental property or properties, and the other spouse keeping assets equivalent in value to the rental property value. These assets could include the marital residence or shares (or all) of the retirement account. Another option is to sell the property and divide the profits. If spouses and their lawyers cannot reach an agreement regarding how the rental properties should be divided, the judge will exercise his or her discretion and make the decision for the parties.

The parties will also need to manage rental income during the divorce process. If the separated spouses can agree on how to do this, even if just through a temporary agreement, it will make the equitable distribution process smoother, quicker, and cheaper. Parties also have the option to put the funds aside in escrow, meaning an impartial third party or trust/property management account will hold the funds until after the distribution proceedings are completed and the divorce is final. The only withdrawals made from the rental income should be for property expenses with both parties having notice of any withdrawals. Then, after a final divorce agreement is reached by the parties or ordered by the court, the funds will be divided appropriately between the parties.

King Law Offices is a full-service law firm with an outstanding team of professionals who work diligently, creatively, and compassionately on behalf of our clients each day. If you have a current conflict with your ex-spouse involving a divorce and the equitable distribution process, contact King Law at 888-748-KING (5464) for a consultation. We have offices located across western North Carolina and upstate South Carolina. We are here to serve you and to guide you as we navigate this journey together.

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