Parents owning a vacation home control the home, deciding when they will occupy the property, who they will invite, when others may use the property, how property expenses will be paid. But when the parents are gone, decisions regarding the property can become much more complicated (essentially several families, rather than one, now own the property): who can use the property and when (particular during desirable long weekends or holidays), who will pay property expenses and in what proportions, what happens when some children do not pay their fair share of the property expenses or remain at the property when others are expecting to use the property?
Further, leaving the property to children permits one child to require a sale of the property (if other children cannot purchase the exiting child’s interest). This situation essentially invites conflict among the children (something an estate plan should strive to avoid).
The two most common approaches to addressing a vacation property--other than simply leaving the property to the children for them to work out--are directing a sale of the property or placing the property in some entity (typically a trust or limited liability company).
Directing a Sale: Parents can direct that the property be sold after the surviving parent’s death. Often the children are given the first opportunity to purchase the property. If none of the children wishes to purchase, the property is sold. This solution has the advantage of equality: each child receives his or her share and is not required to co-own a property, which can become contentious.
Placing Property in an Entity: The property could be placed in a trust (or similar entity) while identifying one or two family members to manage the property (referred to as trustees o managers). The trust might provide for renting the property to raise funds for property expenses (maintenance, insurance, taxes) or might require contributions from those using the property. The trust might establish a usage schedule and procedures to modify the schedule. The trust might establish procedures to address non-cooperating children or for children to withdraw from the trust. A trust also has the advantage of avoiding probate.
If a vacation property does not have great sentimental value or if some children will be financially burdened by receiving the property rather than its value or if the children simply do not get along, probably directing a sale is the prudent option. If it’s possible that the children can occupy the property in harmony, then an entity is a suitable solution, though significant effort would need to be extended in addressing all the unanswered questions that arise when a vacation home become owned by children rather than parents.
image courtesy: www.freepik.com/photos/poolside created by rawpixel.com
