Many people buy real estate properties and rent them out to individuals or businesses for profit. Owning rental properties can provide consistent income during a marriage, however, these same properties can cause significant legal and financial headaches during divorce.
If you own rental properties and you are ending your marriage, it is important to understand your rights and responsibilities regarding the properties themselves as well as the income generated by the properties.
Marital Versus Non-Marital Property
Assets acquired by a spouse during the marriage are generally considered marital property jointly owned by both spouses. Property that is acquired before the marriage is non-marital property. However, there are several exceptions to these rules. Property that is excluded from the marital estate through a prenuptial agreement or other marital agreement is non-marital property regardless of when or how it was acquired. Property, including real estate, acquired through inheritance is usually non-marital property. Non-marital property can also become marital property if both spouses contributed o the increased value of the property.
Determining whether a rental property is non-marital property or marital property is much more complicated if comingling or transmutation has occurred. For example, consider a rental home a spouse owns before getting married. This would be considered non-marital property. However, if both spouses paid for repairs to the property or helped maintain the property, the property may be considered a marital asset during divorce.
Appraising and Dividing Rental Properties
If your rental property is a marital asset, both you and your spouse have a right to a share of the property’s value. You will need to have your rental properties professionally valued so you can address the true value of the property during divorce. Some spouses can work out a property division arrangement outside of Court and proceed with an uncontested divorce. Often, spouses negotiate the exact terms of the property division arrangement through their attorneys. However, if no arrangement is reached, the Court will make a decision based on Illinois “equitable distribution” doctrine.
Should We Sell or Keep the Properties?
Some divorcing spouses choose to sell rental properties, vacation homes, and other real estate assets. They use the proceeds to pay off shared debt or split the profits between themselves. Others maintain joint ownership of the properties and split the rental income. If the couple owns multiple rental homes, they may divide the homes between themselves so that both spouses will have ongoing rental income.
Contact an Arlington Heights Divorce Lawyer
If you own rental properties and plan to divorce, you need a Palatine divorce attorney who knows how to handle complex asset division issues. Contact Nicholas W. Richardson today to get the help you need. Call the Law Office of Nicholas W. Richardson, P.C. at 847.873.6741 for a free consultation.