You cherish your vacation home. It’s your place to relax and enjoy quality family time.
And, of course, you want for your children and grandchildren to have the same heaven and make more memories together after you are gone.
But keeping a vacation home “in the family” isn’t as simple as just making your wishes known. Will your children use it to create happy memories for the next generation? Or will your vacation home become a war zone as siblings fight over who comes on Christmas and who pays for the new roof?
Whether your vacation home is a cabin in Maine or a 4-bedroom bungalow in Malibu, you need customized estate planning to spare your children from endless fighting … and to allow them to preserve their own financial resources.
And it all begins with a conversation.
1. Ask your children what THEY want.
Every family enters the vacation home planning process with lots of assumptions. “Mary loves coming here every spring, of course, she would want to keep the cabin!” Or, “Dave’s kids look forward to the week on the beach all year long!”
This is why experienced planners encourage you to start by having a direct conversation with your adult children.
- How important is it to them to own the family vacation home?
- What arrangement might be comfortable and convenient for them?
- How frequently would they want to visit?
- How many families can the home fit comfortably?
- Where do the siblings live? What would be most practical and fair for designating the person in charge of making decisions and handling maintenance? What about paying utility bills and property taxes?
- Do they see the home as an investment? A place with sentimental value? A money pit?
As you ask these questions, listen well and expect surprises. You might discover that, with no plans for marriage or children, Mary enjoys visiting the vacation home because it’s a chance to spend time with you (and also because it requires no maintenance efforts from her). When you’re not there, she’d rather jet off to spend a week in London.
On the other hand, Dave would pay handsomely to spend more time in the home with his four young children. He is handy with repairs and wouldn’t mind fixing a leaky faucet or refreshing the paint outside every now and then. However, his first financial commitment is to his kids – and expensive repairs may stretch his family’s budget.
2. Incorporate family dynamics in the planning process.
Many families know exactly who could cause trouble. After all, you’ve known your kids since they were born. You know that Mary is probably going to resent Dave’s share of time in the cabin – even though she’s mostly out of town. You know Dave will be bothered that he is always on the hook for repairs with not even a thank-you from his sister.
Recognizing these realities can help you decide how you’ll set up your estate.
If your children are close, you may choose to put the vacation home directly in their names to save paperwork later.
However, if you expect that your two married children will fight over holiday visits, and the never-married third sibling won’t go near the place, you may consider creating a Limited Liability Company. That would allow for an operating agreement to preserve the property – and clear terms for family members who want buyouts.
3. Don’t skimp on hiring advisors.
The best way to avoid having your beloved vacation home becomes the setting for “Family Feud” is to hire competent professionals.
Look for an advisor who will get to know your situation. Your circumstances may call for a creative solution, and you will want an experienced professional by your side to ask questions and stress-test your plans.
For example, you may intend to put the home in the name of your only child to keep it “in the family”. You may not realize that he can lose that home in a divorce 3 years later.
So, begin with a frank conversation. And make sure you are working with an experienced professional to bring your wishes together with family dynamics.
If you are wondering about the best way to handle your vacation home, call your local Ottawa financial planner. We are here to help!
