Splitting marital property in a divorce can be full of conflict. Maybe you’re willing to swap the house for the car, but he’s not. Things get even more complicated when you and your ex own a rental property, which must be dealt with during divorce. Should you maintain it and split the profits or sell it outright and split the proceeds? The answer will depend on the specific facts of your case as well as your personal preferences and financial circumstances.
Is the Rental Property Separate Property or Marital Property?
When dividing rental property in a divorce, New York divorce laws require an initial determination as to whether a particular asset is a marital property or separate property. You are entitled to an equitable share of the rental property if it is marital property.
If you acquired the rental property with your spouse during the marriage or made material improvements that increased its value, New York generally considers it to be marital property. You are entitled to a share of either the property’s revenue or its fair market value.
You are not entitled to a share of your spouse’s separate property. This could be the case if your spouse owned the rental property before the marriage or if your spouse inherited the property.
Options for Dividing Rental Property in a Divorce
New York divorce laws are clear: you are entitled to an equitable share if the rental property constitutes marital property. Note this does not always equate to 50%. The particular circumstances of your case will determine the size of your share in the rental property. In general, after you have the rental property appraised, and assuming the parties agree on its value, divorcing parties have several options.
Option 1: Continue to Operate the Rental Property Together
Continuing to operate the rental property together is not always an option when the parties can’t get along. However, it may be the most advantageous if the rental property generates consistent revenue. Note that a court cannot order you and your spouse to retain the property jointly.
If renting during divorce, and owning and operating the property together, consider having an attorney help you draft a written partnership agreement. This would be beneficial in the event one party wants to bail out unexpectedly or future disagreements arise.
Option 2: Trade One Party’s Share for a Marital Asset Equivalent in Value
Trading other property for the rental home is a good option where one party wants to keep the rental property and the other does not. Simply trade your share for the house and boat and be on your way.
Option 3: Sell the Rental Property
If neither party wants to keep the rental property, or if you can’t agree on who should keep it, then selling it and splitting the proceeds is a viable option. Note that you will likely need to obtain a professional appraisal to accurately value the property. In addition, it will be important to consider federal and state income tax implications for this option.
Get Help with Dividing Rental Property in a Divorce
When a jointly owned rental property becomes a disputed marital asset, navigating New York’s divorce laws can be overwhelming. The answer to how to divide rental property in a divorce varies with your specific circumstances. Finding an effective attorney is crucial. The Stepanian Law Firm has experience in dividing rental property in a New York divorce settlement. Contact Stepanian Law Firm