Vacation Homes

 In Uncategorized

Imagine a family cabin in the woods.  The lake is nearby and there are trails for hiking through the trees.  The kids grow up with fond memories of the cabin and want to take their own children there to enjoy the peaceful setting.  Then the original owners pass away.  The children agree to share the cabin so that they can all continue to enjoy it.  However, some of the children are not able to contribute to the cabin’s maintenance.  Then the property taxes are due, creating an additional financial strain.  Some of the children want to sell, while those who want to keep it in the family are not able to buy out their siblings.  The family cabin becomes a burden instead of being the peaceful getaway that it once was.  It may lead to litigation, forced sales or purchases, and disharmony in the family.

Proper planning for the transfer of a vacation home from one generation to the next can minimize the difficulties and preserve the property so that it can be enjoyed by increasingly extended family.  Unlike an investment account, a vacation home cannot be divided such that the beneficiaries take their portion and do with it as they please.  Some family members will have a greater attachment to the property than others.  There will be varying degrees of ability to pay for taxes and other expenses.

If there is no plan, the surviving spouse will most likely inherit the entire property.  If there are children from a prior marriage, then the surviving spouse would most likely be limited to ½ of the property, with the other ½ going to the children from a prior marriage. After the surviving spouse passes, the property would go to the children, with each child taking a fractional interest.  Each share is vulnerable to claims from creditors of those children, and any child can petition the court for a partition of the vacation home, forcing a sale.

There are several plans that might work to minimize conflict and maximize enjoyment of the vacation home.  These include the following options: 1. Owning the property as co-tenants with a written ownership agreement; 2. Placing the property in an irrevocable trust, possibly with funding to provide for maintaining the property; or 3. Placing title to the vacation home in a limited liability company. With advanced planning for your specific situation, a vacation home can continue to be a place of fun family memories and provide a lasting legacy.

Recent Posts