Can You Keep a Vacation Home in the Family for Generations?

A family vacation home can be a cherished asset, a place of shared memories and bonding experiences. However, as wonderful as it may be, it can also become one of the most complex assets to pass on to future generations. At the same time, everything may seem idyllic when the parents are alive, and well, life and circumstances change. This article explores the complexities of keeping a vacation home in the family for generations and offers some sage advice on navigating this potentially tricky situation.

When parents are relatively young, hosting their children and visitors at the family vacation home is often a joyous and uncomplicated experience. Everyone knows their roles and routines; the home becomes a haven of relaxation and togetherness. Parents often envision their grandchildren and even great-grandchildren enjoying the same bonding experiences in the future.

However, as time passes and generations change, the dynamics can shift. Leaving the family vacation home to all children in equal shares in a will or even a trust could lead to family disputes. Questions may arise about who will be in charge of the vacation home, who will shoulder the costs of maintaining a second home, and how access to the house during peak vacation times will be decided. What was once an idyllic place could become a source of family animosity.

The first step in preventing such a scenario is to have an open family conversation. Determine if the children and grandchildren want the vacation home to remain in the family if appropriate. Understand their expectations and plans for the home. If only one child wants the home, consider giving them the right to buy it from the others or your trust upon your death.

If more than one child is interested in the property, consulting with an experienced estate planning attorney is crucial to plan the property's future. When more than one person is going to own a property together, they need an agreement detailing the rights and obligations of co-ownership. If the decision is made to keep the vacation home in the family, it may be best to leave it in a trust with specific terms for the use of the property, naming a trustee to manage the trust.

The trust language must address how and when the property can be sold, who will pay for property taxes, utilities, minor and major repairs, and the terms for passing the property through generations. This can prevent misunderstandings and disputes down the line.

Alternatively, if the family decides to turn the property into a rental property to generate income, consider putting it into a Limited Liability Company (LLC). Each of the heirs may have a membership interest in the LLC, one is designated as a manager, and an operating agreement is created to set out the terms for selling or otherwise transferring a membership interest.

In conclusion, a family vacation home is a unique asset that needs careful future planning. It's not just about the physical property but also about preserving family harmony and continuing a legacy of shared experiences. So, meet with an experienced estate planning attorney to create a plan for the future, and then go and enjoy your time with the family in your cherished vacation home. After all, these moments of togetherness make a house a home.

Reference: The Press-Enterprise (July 2, 2023) “Do family vacation homes foster closeness or animosity?"