How Are Investment Properties Divided in a Divorce in NC?

Divorce property division is rarely simple, especially when it comes to the division of investment properties like commercial real estate, vacation properties, and rental homes. As these assets are commonly worth substantial amounts and may be a core component of a married couple’s financial portfolio, it is important to understand, “How are investment properties divided in a divorce in NC?”

As homeownership rates are particularly high in North Carolina, it is crucial to understand how the courts deal with real estate during divorce so that spouses can plan accordingly and safeguard their rights.

North Carolina Is an Equitable Distribution State

When dividing up marital property, North Carolina follows equal distribution laws. Under equitable distribution laws, property is divided in a manner that is considered to be fair but not necessarily equal. If the courts need to decide, divisions could be 50/50 or depend on the specific circumstances that each spouse is facing.

Property is categorized into three types under North Carolina law: marital property, separate property, and divisible property. Marital property involves any assets and debts that are brought on during the marriage, while separate property involves assets that are acquired prior to the marriage or received by one spouse alone as either an inheritance or as a gift. Divisible property includes marital property obtained after separation and before distribution.

North Carolina’s Homeownership Profile

According to the 2023 American Community Survey, North Carolina’s ownership rate is high at 66.3%, which is greater than the national average of 65.2%. Of households that are owner-occupied, 1.73 million are married-couple families, which commonly hold investment assets that are shared.

This just goes to show the sheer amount of property ownership that could be impacted in a divorce, particularly in married-couple households that have a higher likelihood of jointly owning investment properties.

Are Investment Properties Considered Marital Property?

Whether investment properties are considered to be marital property is dependent on how the property was acquired and when it was brought on. For example, if an investment property was bought during the marriage using a joint bank account, it would typically be considered marital property, despite whose name may be on the title.

Any properties acquired before the marriage are likely separate property unless joint funds were used to pay down the mortgage and maintain or renovate a property. In this case, a portion of the investment property may be considered marital property. If a spouse was gifted property or inherited it, it is considered to be separate unless it has been used in a joint way that somehow alters its categorization.

Factors Courts Consider in Dividing Investment Properties

After a property has been categorized, the courts then determine how it should be fairly distributed. Key considerations they may take into account include:

• Who was managing, maintaining, and making improvements to the property?
• Was the mortgage or down payment paid using a joint bank account, or were separate funds from one spouse?
• What is the value of the investment property at the date of separation?
• What are the tax consequences if one party keeps the property?

If one spouse can afford to buy out the other or continue with property operations, this may be taken into account, as well as a way to divide up the assets.

What If the Property Produces Income?

It is important to note that commercial properties, vacation homes, and rental homes can commonly generate a lot of income, which can make the division process even more complicated. Therefore, courts will take into account factors, such as income from rent during alimony or spousal support calculations, in addition to the potential for future income, especially if only one party is going to retain the asset.

During divorce, it is a requirement for investment property income to be reported, which can significantly impact the overall distribution of assets and calculations for alimony.

FAQs:

Q: Can My Spouse Take My NC Rental Property If It Was in My Name Before Marriage?

A: If your North Carolina rental property was listed in your name prior to the marriage, your spouse might not be able to retain part of it. If it was kept separate during the marriage and no joint funds were used to maintain, renovate, or pay the mortgage, it can likely be kept as your separate property and, therefore, not subject to division.

Q: What Are the Division Options for Investment Property in NC?

A: The division options for investment property division in North Carolina include three main options: one spouse pays out the other spouse’s share, the property is sold, and the proceeds are split, or the spouses agree to maintain joint ownership and continue splitting both expenses and income. A skilled divorce attorney can help you weigh your options and determine which may be right for you.

Q: Do We Have to Sell Our Investment Property During the Divorce?

A: No, you are not required by law to sell your investment properties during the divorce. Whether you decide to sell, co-own, or have one spouse buy out the other is dependent on the specific details of your case, including your willingness to cooperate, plans for the future, and the finances and logistics associated with property ownership.

Q: How Is the Value of Our Rental Property Determined?

A: During a divorce in North Carolina, the value of your rental property will typically be determined by a licensed appraiser who determines the fair market value of the property as of the date of your separation. A detail-oriented divorce attorney can help ensure that the appraisal is timely and just and that calculated equity is fairly divided.

Protect Your Rights and Interests With an Experienced North Carolina Divorce Lawyer

Whether you are responding to a divorce or need to initiate one, it is important to work with a skilled North Carolina divorce attorney from Lancaster and St. Louis who has an understanding of the legal complexities and financial intricacies of dividing real estate. Don’t leave the future of one of your most valuable assets to chance. Contact us today to start discussing your case.