Passing on a Family Vacation Home Requires Thoughtful Planning
Do you have clients with family vacation homes?
Perhaps they celebrate every Christmas at a mountain lodge built by Grandpa,
take the kids on spring break to a beachside condo, or spend summer weekends
at the old farmhouse so the little ones can catch fireflies.
How do you pass on a client’s family vacation home to the next generation so that everybody
still enjoys spending time together there?
An article published by the Wall Street Journal
) deals with this question.
The article examines some of the complex issues
involved, including paying expenses and determining
access and use. It’s a great article to share with
families considering leaving such assets, as well as
with those who inherit them.
Families Are Not Simple
Once a client passes away, how will the costs to
maintain the vacation home be paid? This includes
taxes, insurance, utilities and repairs (i.e., a new
There are other complex, family-oriented questions
that take more than a spreadsheet to figure out:
• Should every child get an equal share?
• When children get married, can we protect
the property from a divorce?
• How will it be decided who gets to use the
property and how often?
• If one child “wants out” of the arrangement
down the line, will this force a sale?
While one generation of siblings might successfully
share a mountain cabin, the next generation might
not. Later generations won’t have the same
attachment to a property, so an exit strategy should
be considered as part of the plan.
Strategies to Consider
The WSJ article suggests putting the home in a Trust
and to fund it with life insurance. A professional
trustee manages the property and insurance proceeds
cover expenses. If one of the kids wants to sell, the
money in the Trust can be used to buy him out.
The trustee might decide on a schedule of use and
whether the property should be rented out
occasionally to cover expenses.
Working with an estate planning attorney will help
your clients decide which strategy will best fit their
needs, and ensure that the next generation enjoys the
property for many years to come.
To get more information regarding this or any related topic, please visit our website www.TEPLG.com
or call us at 630-871-8778.
Tags: advisors, asset protection planning, taxes