ESTATE PLANNING CINCINNATI: HOW TO KEEP YOUR VACATION HOME IN THE FAMILY Posted on – 04/25/2017 by PJK With summer right around the corner, many families will be heading to the family lake house or to the condo by the beach for some well-deserved rest and relaxation. With all the great times and family memories being made, the owners of these family retreats, usually mom and dad, will start thinking about the best way to keep the vacation home in the family, and whether to hand it over to their kids – and when. Transferring a vacation home to the next generation requires careful tax and estate planning, not to mention some open and frank discussion with your family. Here are four questions to help you get started.
1. How is your vacation home titled? This is an important question, because if your vacation home is located in a different state than the one you live in, this can complicate the administration of your estate, and result in having to go through probate to in more than one jurisdiction. It is usually wise to have your vacation home owned by your revocable living trust to avoid probate, and if you regularly rent it to non-family, you should consider having it owned by an LLC to protect yourself from potential liability.
2. Do you want to keep your vacation home in the family? If the answer is “no,” your planning is much less complicated, as the property can just be sold and the proceeds split among your children. However, many parents want to keep the vacation home in the family for sentimental reasons, and plan to pass it along to the next generation when they die. This is where a well-crafted estate plan becomes so very important. There are a number of options and strategies for keeping the property in the family, including (i) simply transferring it equally to the children, (ii) holding it in trust for benefit of the family, or (iii) granting one or more of the children a first option to purchase the property from your estate or living trust.
3. Do all of the children want to own the vacation home? In many families one or more children do not want the vacation home. In today’s transient society, it is not uncommon for our children to be spread far and wide, so it just isn’t practical for a child who lives on the West Coast to own part of a house in Tennessee. This means that parents that are looking to distribute their assets equally among their children, may need look for a way to treat their child who won’t be receiving a share in the vacation home equally. This may involve giving them a larger percentage of other assets, or some other arrangement.
4. How are the kids going to pay for the upkeep and maintenance? Anyone who owns a home knows that it takes time and money to take care of it. Upkeep and maintenance on second home, that may be located several hours away, can be even a bigger burden as the owner will have to pay someone to take care of a lot of these activities. That is why it is important to consider whether your children will be able handle these expenses, or if your estate plan should be designed to create a fund to assist with these expenses. Many clients purchase life insurance for this very purpose, which insures there are ample funds to keep the vacation home in the family. When it comes to planning for your vacation home, it all starts with sitting down with your family –while hopefully enjoying a beautiful sunset — and having a candid discussion about the future of your vacation home. But don’t be surprised if this talk wanders off track a little and becomes a walk down memory lane. Paul Kellogg is an attorney in Cincinnati with the Phillips Law Firm, Inc. Paul’s practice focuses on providing comprehensive estate planning and probate services to families and business owners, as well as serving as outside general counsel to entrepreneurs and businesses where he provides guidance and advice on a wide variety of transactions and disputes. He can be reached at (513) 985-2500 or via email at [email protected]. Please explore Paul’s other articles on estate planning and business on the Phillips Law Firm Blog page. The article is for educational and informational purposes only and does not constitute legal advice. Anyone contemplating taking legal action is urged to obtain proper legal advice from an attorney licensed in your particular jurisdiction. For an initial consultation contact us at (513) 985-2500 or email us at [email protected] or click Chat Now!® to get started immediately.