When you bought that beautiful beach house, you probably saw it as a great place to spend summer with the family. It was something where you could enjoy time with your children – or even maybe someday – your grandchildren. However, things change. Now you are looking at that vacation home and wondering what is going to happen to it after your divorce.
Often with vacation homes or other rental properties, they are divided much in the same way as a primary residence. However, secondary properties that are not primary residences are a little bit different. This means you need to keep in mind certain considerations.
Options For Handling Vacation Homes in a Divorce
When it comes to dividing a secondary property, there are three primary ways of doing it in a Michigan divorce. As for which way is right for you, it all depends on the unique circumstances of your divorce.
Selling the Vacation Home
Most commonly, divorcing couples will choose to sell the vacation home and split the amount they receive. This is often the easiest option as it simply divides the value, and is preferable for those that want to get a divorce over with quickly. However, there may not be any equity to split, or there may be too much sentimental attachment to the property. If you both cannot agree to sell, there are still other options available.
Splitting the Vacation Home
Not all divorces are horribly contentious. Sometimes, a couple can divorce and still remain on somewhat amicable terms. In these cases, you may be able to split the vacation property, similar to a timeshare. You both pay certain amounts in property taxes and upkeep while setting certain times of year that each party can use the vacation home. This is often a good option for divorcing couples with children who will feel a stronger sense of normalcy knowing they will still get to spend a warm summer week at that Lake Michigan cabin.
Sometimes with this option, a spouse may also wish to take the vacation home up as their primary residence. It might be agreed upon that one spouse keeps the family home while the other takes the vacation property as a primary residence. However, this can become trickier if the homes greatly differ in value or if one home has substantial debt still attached to it. In these cases, you may be able to negotiate that instead of splitting the equity of a home, you will both split the debt of the home instead as an equal property division exchange.
Keeping the Vacation Home
In some cases, it can be negotiated that one spouse keeps the vacation home exclusively. This might mean giving up a substantial amount in other marital assets to do so, however. It should be noted that second homes are not exempt from capital gains tax if you decide to sell it later. It is typically a smarter and less expensive option to adopt the home as a primary residence to gain the capital gains tax exemption.
Which of These Options is Right For You?
There is really no right answer as to what to do with your vacation home or rental properties when going through a divorce. There is often so much to do in terms of asset division, that it is exhausting. However, because vacation homes are subject to so many good memories, divorcing couples are quick to find their fight again for them. Often divorcing couples can come to some agreement, but if they cannot, the courts will. They will look at the value of the home and the value of the other assets to decide how it will be split. Be aware that when a judge splits the vacation home, it is typically declared to be sold. If you wish to preserve ownership, you need to come to an agreement outside of court.