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Dividing investment properties in a California divorce

On Behalf of | May 25, 2023 | Division of Assets and Debts |

Undergoing a divorce poses numerous challenges, both emotionally and financially. One such hurdle involves determining how to split investment properties. In California, the process follows unique legal guidelines, which make understanding the rules essential for an amicable resolution.

Investment properties, similar to other assets acquired during a marriage, come under community property. While the path to divide these assets might seem complicated, a thorough understanding of California’s community property laws can help streamline the process.

Understanding community property

In California, all property purchased during a marriage is community property, meaning both spouses have equal ownership. This extends to investment properties as well. Regardless of who managed or invested in the property, California law states that both parties have an equal claim. This equal split rule applies, even if the title of the property is in only one spouse’s name.

Determining property value

A crucial step in dividing investment properties involves establishing their market value. A professional real estate appraiser typically determines this value. The appraised value forms the basis for division among the parties. Both parties must agree on the appraisal value to move forward.

Division methods

California law offers two ways to divide investment properties: Selling the property or buying out the other spouse’s share. In the first case, both parties sell the property and split the proceeds equally. In the second scenario, one spouse buys out the other’s share based on the property’s appraised value.

Splitting mortgage responsibility

In cases where an investment property carries a mortgage, the parties also need to decide how to divide the responsibility. If one spouse retains the property, they will typically take over the mortgage payments. However, if both parties decide to keep the property jointly for some time, they will need to negotiate the terms of the mortgage responsibility.

Dividing investment properties during a divorce in California follows a legally defined process, centered around equal division. Understanding this can make the journey less daunting and more manageable, fostering a fair and satisfactory outcome for both parties.