Vacation-Home Battles
Emerge in More Divorces

February 10, 2005 -- With the sharp rise in real-estate values, vacation homes often are becoming a major sticking point when couples divorce.

This is especially true when a second home has been in a family for generations. A home may be the inherited property of one spouse, but it often becomes a marital asset when enjoyed by a couple and their children.

During divorce negotiations, some spouses will "make a claim for the house not because they want it, but because they can," says Arlene G. Dubin, a family-law attorney with Sonnenschein Nath & Rosenthal in New York.

Here are some ways to avoid a conflict over a vacation home.

Prenuptial agreement: The best way to avoid legal wrangling is to spell out who gets what before the wedding. The prenup might simply state that gifts and inheritances remain separate from any property that the couple acquires together.

Family limited partnership: A person also can stick premarital assets -- such as real estate -- into a separate pot by setting up a family limited partnership. A person could transfer property into the limited partnership but retain a 1% interest with all rights to control the assets.

Such arrangements work best in conjunction with a prenup, but provide a level of legal protection if a spouse-to-be doesn't want to sign any paperwork, lawyers say.

Irrevocable trust: If you're already married, one option is an irrevocable trust. This typically means children are trustees and rules are established about usage and ownership. A parent, for instance, could designate his or her adult children as trustees and stipulate that they can only pass ownership to blood relatives. (A person with young children can designate siblings to serve until children come of age).

The so-called summer-house trust usually is used "to make sure the property can remain in the family for generations, without interference," says Patricia Annino, a lawyer in Boston. Many parents "don't want to give it outright to children as it could be taken out of the family through divorce," she says.

The creation of an irrevocable trust also removes the value of the property from the parents' estate. At creation, rules are established about the circumstances, if any, under which the property can be sold. Certain rules about usage and ownership can change if a majority of trustees agree, Ms. Annino says.

Postnuptial agreement: This is where a married couple agrees the beach home or ski lodge that has been in one spouse's family for years won't be subject to property division during divorce.

While prenups are well known, "postnups are relatively new and controversial," says John Mayoue, an Atlanta attorney with Warner Mayoue Bates & Nolan who handled the divorces of Jane Fonda, Marianne Gingrich and Evander Holyfield's ex-wife, Janice. Still, a growing number of states are treating the postnup similarly to a prenup, he and other lawyers agree.

Often, a couple will write into the postnup that a spouse, after divorce, can still use the vacation property on occasion.

"It's very common, particularly with people who have children," Mr. Mayoue says. "Of course, the person who owns the vacation home [upon marrying again] regrets those arrangements."

For that reason, he advises the owner to grant usage rights for a set period of time, such as five years, unless or until the other spouse marries again.

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