Passing on a Family Vacation Home Requires Thoughtful Planning
Do you have a vacation home? Perhaps you celebrate every Christmas at a mountain lodge built by Grandpa, take the kids on spring break to a beachside condo, or spend summer weekends at the old farmhouse so the little ones can catch fireflies.
How do you pass on your family vacation home to the next generation so that everybody still enjoys spending time together there?
An article published by the Wall Street Journal (http://tinyurl.com/762fypc) deals with this question.
The article examines some of the complex issues involved, including paying expenses and determining access and use. It’s a great article for those considering leaving such assets, as well as with those who inherit them.
Families Are Not Simple
Once you pass away, how will the costs to maintain the vacation home be paid? This includes taxes, insurance, utilities and repairs (i.e., a new roof).
There are other complex, family-oriented questions that take more than a spreadsheet to figure out:
- Should every child get an equal share?
- When children get married, can we protect the property from a divorce?
- How will it be decided who gets to use the property and how often?
- If one child “wants out” of the arrangement down the line, will this force a sale?
While one generation of siblings might successfully share a mountain cabin, the next generation might not. Later generations won’t have the same attachment to a property, so an exit strategy should be considered as part of the plan.
Strategies to Consider
The WSJ article suggests putting the home in a Trust and funding it with life insurance. A professional trustee manages the property and insurance proceeds cover expenses. If one of the kids wants to sell, the money in the Trust can be used to buy him out.
The trustee might decide on a schedule of use and whether the property should be rented out occasionally to cover expenses.
Working with an estate planning attorney will help you decide which strategy will best fit your needs, and ensure that the next generation enjoys the property for many years to come.