Investing in real estate is a great way to build long-term wealth. Some married couples typically own their properties jointly, but it’s important to plan what happens if you get divorced. Here’s what you need to know about managing your properties in the event of a divorce:
Separate and Community Properties
Under community property states, separate property is anything that is owned by one spouse only. If you invested in real estate before you married, that property is yours. The same goes for inheritances, gifts, or anything else in your name before marriage. Meanwhile, community property is anything acquired with joint funds during the marriage. Almost everything bought after the wedding ceremony is jointly owned by both spouses. For instance, if you invested in a residential rental after marriage using funds from your joint account, then that property is owned by both of you.
Common Law Properties and Community Property States
In common law states, if one spouse buys a property and only indicates their name under ownership, then they are the sole owner of the property. Unless they also include their spouse’s name, in which case the property will be considered both of theirs. This is in contrast to community property states, where assets or debts acquired during marriage is considered owned by both spouses, even if only one name is in the deed or title. Most states follow the common law, whereas community property states include only nine: Nevada, Louisiana, Arizona, Texas, New Mexico, Idaho, Washington, California, and Wisconsin.
Protecting Your Properties
Many couples choose to protect their property with prenuptial and postnuptial agreements. The main difference between the two is that prenups are signed before marriage, while postnups are signed after marriage. They have similar objectives: outlining what will happen to the couple’s properties in the event of a divorce.
Prenups are commonly signed by couples who own their own properties before marriage. This is to prevent the property from being taken by the other in the event of a divorce. For instance, if one spouse owns a house before marriage and wants to keep it as their own, they would need to sign a prenup indicating that the property will remain theirs in the event of a divorce. Once both spouses sign a prenup, they acknowledge who owns what during their marriage.
Meanwhile, postnups are often signed years after marriage. This is likely the case if the couple acquires more assets during the marriage. It can also be signed if one spouse wants to protect their property after getting married if they didn’t do a prenup. Another situation that might call for a postnup is if, for example, you inherit a high-value house from your parents after you’re married. A postnup will ensure that it remains yours even after divorce.
Division of Properties for Divorce
If you signed a prenup or postnup, you would likely avoid property disputes in the event of a divorce. This is because you would have already agreed on who owns what during the marriage. However, if you don’t sign an agreement, you may face challenges with the division of properties.
In community property states, separate property remains with the spouse who owns it. On the other hand, community property is usually divided equally between spouses. However, there are some exceptions to this rule. For example, a spouse may be awarded exclusive use of a particular piece of community property, such as the family home.
It is also possible to discuss how you will divide your property between the two of you. But if you and your spouse can’t agree on which properties go to which spouse, the court will have to divide the property, other assets, and debts between you.
The court will generally grant each spouse an equitable percentage of the total properties. However, this doesn’t mean you will each receive an exactly equal share. This is why you must ensure the court’s decision will favor you. You can increase your chances by hiring a reputable family attorney who can help you prove to the court why you should receive a greater share of the community property. This will put forward your best interests, so the court is more likely to rule in your favor.
Understanding how properties are divided during a divorce is necessary to protect your financial interests. This ensures that you will not be taken advantage of. With the right knowledge and guidance, you can safeguard your properties and ensure that you will receive a fair share in the event of a divorce.