Divorcing and Dividing: What Happens to Your Vacation Home?

  •   |   Meghan Freed

ski houses and other vacation homes can be challenging to divide in a divorceThe primary family home tends to get more attention than vacation homes during a divorce.  However, vacation homes often also have significant emotional and financial import to spouses and can raise unique challenges when a marriage ends.  As couples face the difficult task of parting ways, they must also determine what will happen to a beloved getaway spot they once shared.

This article will explore the various scenarios and options that divorcing couples may encounter regarding their second home.  We’ll discuss the possible outcomes if one party wants to keep the property and the potential repercussions of selling or renting out the house.  Additionally, we’ll delve into the legal and financial factors that play a role in these decisions.  The goal?  To shed light on the specific steps you’ll take during asset division.

Divorcing and dividing property is never easy, but understanding the implications and options regarding a shared vacation home can help couples find a way that works for them.

Understanding the Legal Process of Divorce

Divorce is a complex legal process that involves the dissolution of a marriage and the division of assets, including second homes like beach houses and ski houses.  Regarding vacation homes, the first step is determining whether one spouse purchased or inherited the vacation home before marriage.  Connecticut doesn’t have the same concept of separate versus marital property as many states have.  In other words, all property is subject to division in CT divorces.  However, Connecticut courts do look at how and when property was acquired when determining how to allocate the equity.

It’s also worthy of note that many high net-worth couples may have a prenuptial or postnuptial agreement that addresses the division of their vacation homes.  However, suppose there is no such agreement in place when dividing property.  In that case, the Connecticut court will typically consider factors such as the length of the marriage, the financial contributions of each spouse, and the best interests of any children involved.  It’s also wise to consider alternative dispute resolution (ADR) approaches to handling your divorce, such as mediation or collaborative divorce.  These methodologies support creative thinking to address the emotional, legal, and practical aspects of divorces with second homes.

Freed Marcroft’s family law attorneys can help you understand how Connecticut laws might work in your specific situation.  They can also address what happens when your beach or ski house is outside Connecticut state lines.

Read: Who Keeps the House in a Divorce?

Read: How Does Property Division Work in a CT Divorce?

Understanding Ownership and Title in the Divorce Context

The distinction between how property is titled versus property division during divorce tends to be confusing for divorce clients.  Just because a second home is in one spouse’s individual name doesn’t mean the other spouse isn’t entitled to a portion of the home’s value.  Similarly, just because a mortgage is solely in one spouse’s name doesn’t mean that a CT divorce court can’t make both spouses responsible for mortgage payments.

That said, there are three basic types of title to real property (aka real estate).  They are:

  • Sole ownership means that one spouse is the sole owner of the vacation home and has the legal right to sell or retain the property.  In this case, the non-owning spouse may receive a portion of the home’s value as part of the divorce settlement.
  • Joint tenancy means both spouses have an equal and undivided interest in the vacation home.  If one spouse wants to keep the vacation home, they may have to buy out the other spouse’s share.
  • Tenants in common means that each spouse has a separate and distinct interest in the vacation home.  This is the least common ownership structure for CT married couples.

Determining ownership of the vacation home is a critical step in the divorce process, as it sets the stage for how the property will be divided or retained by one party.  In some cases, second homes may be owned with parents or siblings or held in a trust.  If you or your spouse owns property with someone other than their spouse, you and your divorce attorney will want to explore how to handle that early on.

Read: How to Value the Family Home and Other Real Estate

Evaluating the Second Home’s Value in a Divorce

Before making decisions regarding the vacation home, it is crucial to evaluate its value accurately.  Determining the value of a vacation home can be a complex task, as various factors come into play, such as location, condition, and market trends.

One option is hiring a professional appraiser specializing in valuing real estate.  The appraiser will assess the property and provide an unbiased valuation based on market conditions and comparable sales in the area.  This valuation will help determine the fair market value of the vacation home and serve as a basis for negotiations or court proceedings.

It is important to note that the value of the vacation home may have appreciated or depreciated since the purchase.  Factors such as renovations, improvements, and changes in the real estate market can influence the property’s value.  An accurate valuation is crucial for ensuring a fair division of assets during the divorce process.  In divorce litigation, you may see competing appraisals from each spouse’s expert.  In the ADR modalities like mediation and collaborative law, spouses may agree to retain one appraiser jointly.

Read: What Happens to the Family Home After Divorce?

Options for Dividing the Vacation Home

There are multiple ways to divide the vacation home (or distribute its equity).

Selling the Vacation Home

One option is to sell the vacation home and divide the proceeds between the spouses.  This can be a straightforward solution, allowing both parties to move on and have a clean break from the property.  Selling a vacation home can provide you with cash to start anew or invest in other assets.

However, selling the vacation home may not always be the preferred option, especially if there are strong emotional ties to the property or if it holds sentimental value for one or both spouses.  In those cases, the spouses may want to consider other options.  There’s more opportunity for creativity on this piece if you reach an out-of-court settlement rather than asking a judge to rule.

Read: Settlement & Divorce

Buying Out Your Ex-Spouse’s Share

If one spouse wishes to retain the vacation home, they may choose to buy out the other spouse’s share.  This option requires careful consideration of financial resources, as it involves paying the other spouse their portion of the home’s value.

To determine the buyout amount, generally speaking, we subtract the fair market value of the vacation home from the outstanding mortgage balance and any other liens or debts associated with the property.  The resulting equity is then divided between the spouses.  This may be 50/50 or some different ratio.  The spouse who wishes to keep the vacation home can then pay the other spouse their share in cash or through other assets.  Sometimes, a refinance or home equity line is used to accomplish this.

Buying out your ex-spouse’s share allows for the retention of the vacation home. It can provide stability and continuity, especially if the property holds sentimental value or is a significant part of family traditions.  However, it is essential to consider the financial implications and ensure that the buyout is affordable and sustainable.

Read: What Happens to Trusts in Connecticut Divorces?

Renting Out the Vacation Home

Another option to consider is renting out the vacation home.  Renting out the property can provide a steady stream of income, which can be used to cover expenses or contribute to the financial well-being of both parties.

Renting out your vacation home can be particularly advantageous if the property is in a desirable location or has a high rental demand.  However, it is crucial to consider the responsibilities and expenses associated with being a landlord, such as property management, maintenance, and potential vacancy periods.

Also, renting a second home to others requires cooperation and agreement between the divorcing spouses.  Their divorce agreement would likely need to contemplate how they will handle tenants, repairs, and rental agreements.  Of the three options, continuing to own the second home jointly and rent it out is the most complicated and potentially creates post-judgment issues.  In other words, the logistical problems and continuing financial ties to your spouse can create friction and resentment.

Read: Inheritances & Marital Property in Divorce

Considering Financial Implications of Buying Out Your Spouse

When it comes to a vacation home during divorce, one option for divorcing couples is for one party to buy out the other’s share.  This can be an ideal solution if one spouse has a deep attachment to the property and wants to keep it for themselves.  However, it’s essential to consider the financial implications of this decision.

First and foremost, obtain a professional appraisal of the vacation home to determine its current market value.  This appraisal will serve as the basis for negotiations between the spouses.  The buying spouse must compensate the other spouse for their share of the property, typically based on the appraised value.

In addition to the buyout amount, the buying spouse must also consider other costs associated with the property.  These may include mortgage payments, property taxes, homeowners association fees, and maintenance expenses.  Investigating these ongoing costs is crucial to ensure the buying spouse can afford to keep the vacation home.

Another consideration when buying out your ex-spouse’s share is financing the transaction.  If you don’t have enough cash on hand, you may need to explore options such as refinancing the property or taking out a loan.  It’s important to consult with a financial advisor or mortgage specialist to determine the best course of action based on your circumstances.

Buying out your ex-spouse’s share can be a viable option for retaining your beloved vacation home.  However, it’s crucial to carefully consider the financial implications and seek professional advice to ensure you make a sound decision.

Read: Property Division in Financially Complex Divorce Cases

Next Steps

Deciding how to handle a vacation home in your divorce can be legally, logistically, and financially complex.  It can also be emotional.  However, by understanding the legal and financial factors involved, couples can make informed decisions about the future of their shared property.  Whether selling, buying out, or renting out the vacation home, it’s essential to prioritize open communication, compromise, and the best interests of all parties involved.  With the guidance of experienced divorce attorneys and financial professionals, couples are in the best possible position to find a resolution that works for them.

Freed Marcroft LLC

Freed Marcroft LLC