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Divorce and real estate portfolios in Maryland

On Behalf of | Jan 18, 2022 | Divorce |

If you are a real estate investor in Maryland, your portfolio may be one of your most valued financial assets. Typically, the judge will divide all of your marital assets during divorce, but that doesn’t mean you’ll lose your business. Here are some ways you could use to protect your real estate assets.

Transform your real estate business into an LLC

An LLC is a business structure that separates the owner from the business. In other words, the court will not hold you liable for the debts or liabilities of your real estate business. However, the time in which you do this matters.

If you started your real estate as an LLC before marriage, the court would treat all of its assets as separate property during your divorce, but the income you get from the business will be marital. Furthermore, as the manager of your real estate business, you need to have paid yourself sufficiently when you were married. If you paid yourself less, your ex could become entitled to your real estate business assets because the judge will take the reduced family cash flow as the family’s reinvestment into your business.

Lastly, avoid hiring your spouse in your company. They will have a right to claim your business by helping you grow it.

Buy out your spouse

If you didn’t set up your business as an LLC earlier on, or if your spouse has a claim to it, your next best option might be to buy them out. Before you do this, find a professional appraiser to estimate the total value of your real estate portfolio, and offer your ex a proportional sum of their share in your business.

If this seems like a good idea for you, ensure that you follow all the official channels when making this deal. Don’t just offer your spouse a check without them signing a legally binding document in the presence of your attorney.

No one in Maryland gets into a marriage with the idea that it’ll end someday, but however optimistic you are, you should always plan for the worst. If you own a business or manage a portfolio, a well-drafted premarital agreement is a very useful tool when getting into marriage.


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