Vacation Homes Can Spell Trouble in High-Asset Divorces

Ending a marriage requires dividing assets and property.

It requires coming to grips with a major temporary or permanent change in your finances after divorce.

The so-called “high-asset” divorce forces this reality home. It’s possible to resolve your differences amicably – and, in fact, this may be the wisest course of action when there’s a lot of money and other assets at stake – which will involve plenty of negotiation leading up to settlement.

In the high-asset divorce, you’ve got stocks, retirement accounts, homes and vacation homes to deal with. The vacation home (and the mortgage) is the subject of what follows below.

A Vacation Home May Complicate Your Divorce

If you’ve got a vacation home and it’s relatively easy to get there, chances are pretty good that one of you will be spending more time there (while the divorce or separation is pending) rather than both of you together in the primary home.

But this is a temporary fix.

Ultimately, both of you will have to figure out how to continue using the vacation home. Or, as often happens when it comes to property division in family law, whether you’ll decide to sell the vacation home and divide the proceeds of sale.

If you cannot figure this out, a judge may decide for you.

Tip: The most important take-away when it comes to vacation homes is to step back and consider what’s best from an economic standpoint. In divorce, it’s all too easy to allow emotion to rule the day, and a vacation home, in which the family spent a lot of time in the past, can be a source of great sentimental value for one or both parties.

So ask yourself the following questions:

  • What’s the current market value of the vacation home? Get an appraiser. An accurate appraisal means both parties will know how much the home can be sold for, and whether or not it should be.
  • Can you consider sharing the vacation home? Depending on the circumstances, the home may be tough to sell, or even underwater, where the value of the home is less than the balance of the mortgage.
  • Would you allow the vacation home to go free and clear to your ex-spouse or ex-partner? In this case, the home can be used as a sort of bargaining chip during negotiations.
  • Who will be responsible for the mortgage? Mortgage debt is the responsibility of both parties, even if they’ve divorced, because both names are on the mortgage note. A refinance may result in the removal of one ex-partner’s name from the mortgage.

Vacation homes often spell trouble in divorces because they are generally high-value properties. And high-value means money, which is nearly always the most important issue – second only, perhaps, to child custody – and the failure to come to an out-of-court agreement can result in the court stepping in and making the decision for you.