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What happens to your investment properties in a divorce?

On Behalf of | Oct 28, 2021 | Family Law

Married couples often invest substantial effort and assets in their efforts to generate income for the household. Some couples support their families or fund their retirement accounts by acquiring and managing residential rental properties together.

Owning several houses or duplexes can be a way to generate revenue while simultaneously developing equity in a building. Unfortunately, your real estate investments will likely be vulnerable when you decide to divorce in Tennessee.

What will likely happen to your investment properties at the end of your marriage?

Who determines what happens with your property?

In a Tennessee divorce, there are numerous ways for property division to occur. Some spouses already have a marital agreement. If you signed a prenuptial agreement before you got married or a postnuptial agreement when you first started acquiring properties, the terms of that agreement will determine what happened to your assets.

If you don’t have an agreement, you and your spouse have the opportunity to negotiate your own property settlement. If you cannot, the matter may go to court. In a litigated divorce, a family law judge will then apply Tennessee’s equitable distribution standard to your marital assets. Any rental properties that are part of your marital estate will be at risk of division.

What happens to the individual properties?

There is a lot of discretion involved with what happens to individual pieces of real estate during the property division process. Whether you make the decisions or a judge does, you can divide the properties or their value.

Some couples may decide to sell the real estate and split the proceeds because neither person has the time or skills to manage a property alone. Others choose to continue doing business with each other and draft contracts accordingly.

Other times, the preferred approach is to have each spouse keep a certain number of properties. You might even combine those two methods, selling some properties and retaining others. One spouse might buy the other out of the business, or they might even sell their business as a turnkey operation to someone else.

Thinking about your long-term goals can help you decide what approach would be best when dividing your property in a Tennessee divorce.