If you want to keep your vacation house in the family, start planning. If you don’t include it as part of an overall estate plan, it can result in family disagreements. Money’s recent article, “4 Questions to Ask Before Passing Down the Vacation Home to Your Kids,” suggests that you ask yourself about these issues to make sure you’re making the best decision for your family.
Who Really Wants It? It’s not uncommon for couples to want to leave vacation homes to their children (or other family members) as a way to preserve the associated memories. Maybe that’s why they miss a critical step—seeing whether family members actually want to own it.
What’s the Best Form of Ownership? There are several options. One of the easiest is to leave it outright in your will to specific family members. But this may create more complexities for your heirs—and possibly disagreements. Another option is to pass down the home through a trust, which can help alleviate some of the resentment from outright ownership.
Who’ll Pay for Upkeep? Vacation homes can be expensive. Your children might not be able or willing to cover those bills with their own money. A key consideration is whether to set aside additional money to cover the home’s ongoing costs. Many families who set up a trust leave extra money to cover operating costs for at least five years’ worth of expenses. That’s enough to pay for the home in the short term. The children can see if they actually want to keep it, and who really wants it.
Keeping the vacation home in your family may not be possible. You can draft your trust so that a sale of the house can be “forced” if, for instance, a majority of the trust beneficiaries want the vacation home to be sold. The trust could give each beneficiary the right of first refusal to purchase the house for its appraised fair market value. And if no one wants to buy it, the trust can require that it be sold to a third party. The proceeds would be divided among the heirs.
With a family vacation home, it’s important to take steps to assess whether it’s the right thing for your family to inherit and how it would be cared for over the years.
Reference: Money (July 18, 2016) “4 Questions to Ask Before Passing Down the Vacation Home to Your Kids”