When contemplating a divorce involving highly-valued assets such as a vacation home, you may feel overwhelmed. Monetary considerations, the property division process and complex financial issues are stressful, and so is emotional impact of the split. An experienced divorce attorney will advise you to strive for fairness and objectivity when making decisions about your vacation property that will impact you and your children for years to come.
Community property and your vacation home
When obtaining a divorce in Washington, you are dealing with community property laws. In the best case scenario, you and your spouse can agree amicably on property and asset division. Unfortunately, this is not very common, especially in high net-worth divorces where you are making critical decisions about large sums of money during a volatile situation. However, in the event that you cannot come to an agreement, the court can and will make that decision for you.
Essentially, the court views most assets acquired during the marriage as community property. If you own a vacation home such as a villa, cabin, cottage, condo or other real property together, it is easily viewed as a community asset. It is when one of you owned the vacation home prior to the marriage or purchased it with separate assets during your union that the waters become a bit murkier.
The location of your vacation getaway can be a factor as well. Many couples invest in seaside and mountain property within Washington, while others enjoy faraway vacation spots, such as Mexico or the Caribbean. The court considers all of these factors and more when determining who will retain this surplus real estate. A 50-50 split is not a likely option in a Washington court. "Just and equitable" distribution is the benchmark here. For these reasons, it is wise to confer with a knowledgeable high net-worth divorce attorney before you make any critical decisions about your vacation property distribution.
3 Common options
So, what should you do with this property? While this is a matter of personal preference that is specific to your unique circumstances, here are some popular choices to consider.
- Sell - This may appear to be the simplest and most economical solution, but it is often complicated by low housing values, an underwater mortgage and an emotional attachment to the property and its memories.
- Share - Are you and your spouse on good terms? Is it feasible to retain the property and take turns staying in it? If you have children, this may be a nice way to retain some normalcy for them in the face of divorce. Keep in mind that there are tax considerations to maintaining a second residence.
- Assign - Are either of you willing to solely retain the extra home as a second residence? Be sure to consider asset value, possible future capital gains taxes, the cost of maintaining the property and any outstanding mortgage.
To ensure that you make the best possible decision regarding the fate of your vacation home in an upcoming divorce, the best advice is to discuss your options with an experienced divorce attorney and to review potential tax consequences with a tax professional.