Dividing assets during a divorce can be contentious and frustrating. While there may be objects that hold sentimental value, the most important goal is reaching a fair division of property that will allow each of you to leave the marriage in the most positive financial situation possible.

If you and your spouse discussed the possibility of divorce prior to your wedding, you may have opted for a prenuptial agreement. This agreement can identify any assets that will be exempt from property division or designate certain assets for you or your spouse in the event of a divorce. If no such agreement exists, you may find yourself facing some complicated transactions, especially if you own investment properties.

Going your separate ways

Owning residential or commercial properties as an investment is becoming a popular way to supplement income and prepare for retirement. You and your spouse may have accepted the challenge and purchased multiple rentals to diversify your portfolio.

Now that you are facing divorce, you may benefit from the following information about separating investment properties:

• If one of you owned the property individually prior to the marriage and kept its management, profits and expenses separate from your marital assets, that property may be exempt from division at settlement.
• If your spouse individually owned property, but you contributed to its management or maintenance, you may have a claim to it.
• Properties you purchased together or supported jointly are marital property under California law.
• To divide the properties, it will be necessary to have them appraised, including their current tenancies and income, for a fair comparison of their values.
• The function of your rental properties will be important to their division since properties purchased as investments for retirement may figure differently than those intended merely for income.

The simplest solution may be to sell all the jointly owned buildings and divide the profits, but you may be able to separate them fairly without selling. If either of you ends up with properties that still carry mortgages, you may have to refinance to remove joint ownership unless you have confidence that your spouse will continue to pay his or her share of the monthly payments. All of these options are time-consuming and may not be resolved even after the signing of your divorce decree.

Another option is to continue as joint owners and managers of the properties, working as business partners. This is not always feasible, and you may know already that it would not work for you and your spouse. You will certainly benefit from the advice of an attorney who has experience and skill in complex property division.