Landlords and Real Estate Investors Often Have Complex Divorces

Many married couples decide to go into business together. There are a host of reasons that a couple might start a joint business venture. They may have complementary skills that work well together for business development. Other times, they may hope to spend more time with one another and their children by working together.

One popular option for family businesses involves real estate. Whether you buy up homes, fix them and flip them for a profit, or invest in properties to rent out as landlords, working in real estate can offer families both financial security and a great deal of personal freedom.

However, if you are considering divorce, a real estate investment venture could quickly become a complicating factor. If you didn't take steps to protect the business from divorce during formation, you could face a complex divorce.

Are you prepared to split your business and its assets?

There are many common myths out there about marital property and divorce in Colorado. Some people think that if they are the primary business manager or if their name is the only one on a deed, that protects them in the event of a divorce. They imagine they will retain the business and all its assets, while their spouse receives nothing.

However, if both you and your spouse have a financial interest in the business, the court will be less interested in titles and deeds than in when you purchased the property and what funds you used. If you used marital assets, such as your income from earlier in the marriage, to purchase real estate property, the courts will likely expect you to split it in the divorce.

Have you considered buying your spouse out or splitting the business?

There are many different potential approaches to splitting up a real estate business in a divorce. You don't have to wait for the courts to decide who gets what. Instead, you can try to set terms now to protect your interest in your business.

If you have a large number of properties, you may consider simply splitting them between you and your spouse. You may choose to base the division on the rental income or the overall value of the individual properties. So long as the split is reasonable and fair, you could set the terms on your own before the divorce. If you only have one property that you intend to sell, you will likely need to split the proceeds with your spouse in a divorce.

It may also be possible to retain the business by buying your spouse out. He or she may receive more of your non-business assets, or you may agree to ongoing spousal support to offset the value of the business. If you can't agree on terms for splitting the business or buying it from your spouse, the courts will most likely make those decisions for you.