If you own a vacation home and you want it to remain in your family for the continued enjoyment by your children and future generations, you might want to consider some special planning to avoid unnecessary conflict.
For example, your estate plan could specifically cover how your vacation home is to be used and maintained following your death. This could avoid tension among family members on how to upkeep the property and who should pay for property taxes, insurance and utility costs.
For example, if a couple has three children, a traditional estate plan would give each child one-third of an interest in the family vacation home. As a result, each child would be responsible for the payment of the expenses of maintaining the property, regardless of how much he or she uses it.
This works as long as the children can amicably work out the details. But circumstances may change, such as a child moving away so it’s not as easy for him or her to use the property. Or a child may want to sell his or her interest in the property to someone not acceptable to the other children.
One common tool is to put the family vacation home in a trust for the benefit of the children and future generations. It can be created during your lifetime or be part of a will. The trust can state who should decide how much money to spend on maintenance. It could also cover other details such as how children and their families let each other know when they want to use the property.
The trust can also have a provision that prevents creditors from reaching a child’s interest in the family home. It can also permit a child to sell an interest in the property to the other children.
Aside from a trust, other ways to preserve family ownership in the property include a limited liability company, a partnership, or a tenancy in common agreement. The best choice depends on what you want to do with the property and the unique dynamics of your family.