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How Are Vacation Homes Treated in a Divorce?

In Alabama, vacation homes and other real properties that either spouse acquires during the marriage are marital property. The court will divide these properties equitably. This means the value of the properties is divided between the parties, but an entire property may be awarded to one spouse to offset another asset. 

If two spouses bought two homes that were equal in value during the marriage, each spouse would get one property. The point of offsetting the value by awarding each spouse one property is avoiding the sale of both properties and a division of the proceeds. Say the spouses have children and the vacation home is in a different area than the spouses’ primary residence.  Vacation Homes in Divorce

The spouse who is awarded the vacation home in a Jefferson County divorce may choose not to live there. They may choose to sell the vacation home and use the money to buy a new primary residence in the town where they live. This is their prerogative. 

The court is able to make a determination about properties that are not in Alabama as long as the online divorce occurs in Alabama. The exception to the rule regarding equitable division is if one spouse acquired a property by inheritance during the marriage. Then that property is separate property owned by the spouse who inherited it. The other spouse has no right to this property. If a spouse inherits money or stock which they sell, any property they buy with such funds is also separate property.

When a non-inheriting spouse pays property taxes with separate or marital property or puts in work into improving the inheriting spouse’s separate property, the court may award them a sum or asset equal to the value of the amount of taxes they paid or their work. For example, say the wife inherited a condo from a late uncle while she was married. If the husband enlarged the deck of the condo, the court would award him the value that the deck added onto the asking price for the condo. 

Another exception to the equitable division rule regarding real property occurs when the property is acquired by a business that the spouses started. If the property is owned by the business, the question becomes how much work and separate property each spouse put into the business. The court will then equitably divide the real property with these facts in mind. For example, say one spouse founded the business with separate property during the marriage and the other spouse became an hourly employee of the business after it was established. The spouse who was the hourly employee would likely not be entitled to the parcel that the business occupied.

The situation would be different if the two spouses co-founded the business together and each brought an equal amount of separate property to buy the parcel for the business. Then the court would order the sale of the property and the business. Each spouse would get half. Alternatively, one spouse could keep the property and the business. The other spouse could be awarded other assets equal in value.

If a spouse made the effort to improve the business during the marriage, they could be compensated for that effort in the Shelby County divorce. For example, say a wife orchestrated the redesign of a kitchen for a restaurant that was a family business during the marriage. The court would likely award her the value of the sum of the hours she put in, at a reasonable hourly rate. 

When spouses refinance a vacation home or other property or owe money on a mortgage for it, the court will look at how the property was acquired. If one spouse owns the real property but the other signed as a surety for a loan, the court may want to review the loan documents. A spouse who does not own the property may want to get out of being responsible for the loan. This will require a negotiation with the lender. It is not a matter that can be resolved solely by the divorce court’s equitable division of property.

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