family vacation home

Can You Keep a Vacation Home in the Family for Generations?

by

As terrific as it may be to have a family vacation home, the same reasons it’s a wonderful thing can make it one of the most complex assets to pass to future generations. Everything’s great when the parents are alive and well. Still, over time this changes, as explained in a recent article, “Do family vacation homes foster closeness or animosity?” from The Press-Enterprise.

When parents are relatively young and hosting their children and visitors, life at the family vacation home is easy. Everyone knows the routines of the day, who cooks, who cleans, who is in charge of the barbeque, and where the best swimming is. Parents envision their children’s children coming every summer and enjoying the same relaxed bonding experience.

But life changes, especially as generations pass on. Leaving the family vacation home to all children in equal shares in a will or even in a trust could be a prescription for a family disaster. An idyllic place could turn into a family feud.

Who will be in charge of the vacation home? The eldest child, or the one who lives closest to it? Is one child wealthier than the others and more able to shoulder the costs of maintaining a second home? And as grandchildren grow up and have families of their own, deciding who will have access to the house during peak summer weeks can become acrimonious.

Start by having a family conversation to determine if the children (and grandchildren, if appropriate) want the vacation home to remain in the family. Do they all want it, and how do they expect to use it? Are they considering tearing it down and building a larger home, or could it become rental property?

If only one child wants the home, do they want to inherit it instead of receiving any other inheritance? Are there enough assets to equalize the gift? If not, you could give the child who wants the property the right to buy it from the others or your trust upon your death.

If more than one child is interested in the property, you’ll want to talk with an experienced estate planning attorney to plan the property’s future.

Any time more than one person is going to own a property together, they need to have an agreement detailing the rights and obligations of co-ownership. If the decision is made to keep the vacation home in the family, it may be best to leave it in a trust with specific terms for the use of the property, naming a trustee to manage the trust—one or two people, but not everyone in the family. The trust language must address how and when the property can be sold, who will pay for property taxes, utilities, minor and major repairs, and the terms for passing the property through generations.

If the family decides they’d prefer the property to become a rental property to generate income, consider putting it into a Limited Liability Company (LLC). Each of the heirs may have a membership interest in the LLC, one is designated as a manager, and an operating agreement is created to set out the terms for selling or otherwise transferring a membership interest.

An asset as special as a family vacation home needs and deserves planning for the future. Meet with an experienced estate planning attorney to create a plan for the future, then go and enjoy your time with the family.

Reference: The Press-Enterprise (July 2, 2023) “Do family vacation homes foster closeness or animosity?”

Additional Reading

Estate Planning Essentials for the Sandwich Generation

Estate Planning Essentials for the Sandwich Generation

The Sandwich generation refers to a generation of people who are simultaneously caring for their aging parents and their children. This group often feels “sandwiched” between the needs of their parents and their children and may face challenges in balancing caregiving...

read more
How Marital Trusts Help Protect Blended Families

How Marital Trusts Help Protect Blended Families

Navigating Marital Trusts: Securing Your Spouse's Financial Future Embarking on a journey of blending families brings its own set of joys and challenges. In this blog post, we unravel the complexities of estate planning for blended families and explore why the Marital...

read more
Essential End of Life Documents: What You Need to Know

Essential End of Life Documents: What You Need to Know

End-of-life planning is a crucial aspect of life that often goes unaddressed until it's too late. Beyond drafting wills and trusts, understanding the array of end-of-life documents is paramount for ensuring a comprehensive and legally sound estate plan. This  guide...

read more