How are Vacation Homes Divided in a Divorce?

It is critical to note that when a divorce arises, the parties maintain a right to reach critical decisions about property and asset division without the intervention of a court. Thus, if a vacation home is marital property and the ex-spouses are amicable, it may be possible to negotiate terms in which one spouse retains the vacation property in exchange for other assets. However, if an agreement cannot be reached, a judge will determine how assets will be divided among the parties, considering factors including (but not limited to):

• The financial needs and obligations of the parties;
• The separate property of each spouse;
• The length of a marriage;
• The parties’ conduct during the marriage (including economic misconduct);
• The income of each party;
• Each parent’s age and health; and
• Future employability.

There are three common options for dealing with vacation homes in a divorce (assuming that the property is a marital asset):

1. Sell the Vacation Home. While selling a property may appear to be an expeditious and simple resolution, the economy, upside-down mortgages, and emotional attachment can make selling a home more challenging than it might at first seem.
2. Timeshare. In situations where ex-spouses remain on good terms, the parties may wish to share a vacation property, allocating certain dates to each individual. In these instances, a separate entity (like a limited liability company) can be created to hold legal title to the property, and an operating agreement can be developed which specifies all of the terms and conditions relating the property.  The property can also be rented out and a management company can be retained to manage the property, if desired.
3. Assign Ownership to One Spouse. If one spouse is interested in retaining the vacation property, ownership of the vacation property can be assigned to one of the spouses. If this is the case and there is equity in the vacation home, then the spouse not receiving the vacation home may be “bought out” by the other spouse, often through a greater share of other marital assets, an assumption of more debt by the spouse receiving the vacation home, or through future payments by the spouse receiving the vacation home to the other spouse.