If you have a family vacation home, have you considered what will happen to the property after you are gone? While you are undoubtedly enjoying the memories you are making in your second home, the reality is you will have to transfer the property at some point.
Transitioning the family vacation home can bring out the best, and the worst, in families. Proper planning in advance can be the key to saving the vacation home – and the family.
MarketWatch recently provided some helpful pointers in an article titled “Avoiding family feuds over vacation homes.”
Aside from the obvious sibling rivalry issues or parental favoritism (real or imagined), there is the issue of the next “owner.” If you choose one side of the family or one adult child to take up ownership, then you risk slighting others and risk the “family” part of the family vacation home. If this is a concern, then you might want to consider creating an “entity” to own the property.
To allow the ownership of the home to be spread out evenly among family members, consider forming a Limited Liability Company (LLC). This approach can give certain family members a membership stake in the ownership of the home itself and a forum for polite discussion about it.
Alternatively, you might consider a trust. The original article stresses a few standby forms of trusts; the Qualified Personal Residence Trust (QPRT) and the simple revocable trust, both of which have their strengths in terms of ownership transfer, conflict mediation, and even some hefty tax benefits if you plan correctly.
Ultimately, the approach you take will depend on your unique family dynamics and the home in question. There is no one-size-fits-all approach.
Reference: MarketWatch (September 16, 2013) “Avoiding family feuds over vacation homes”For more information on asset preservation and estate planning, please visit my estate planning website.