Keeping Family Vacation Homes in the Family
In the summer of 2020, “cabin fever” took on new meaning and stir-crazy-inducing isolation was de rigueur. So it may come as no surprise to you that the demand for family vacation properties increased last fall. I imagine we were all looking for ways to make the upcoming summer of 2021 much more enjoyable. Were you one of the many swept along in the fervor for a family vacation home? If yes, then, as you get ready to enjoy your new family oasis or head off to the old family cabin, you may be thinking about how to turn your vacation property into a family legacy for future generations to enjoy. Not sure where to start? Use the following three steps to get the ball rolling.
Have an Honest Conversation
Successfully passing your vacation property to the next generation requires their buy-in. Sit down with your family members and have an open discussion about the property’s future. Your summer haven might be their idea of hell! The oldest may benefit most from the cash of the sale of the property, while the youngest may dream of future generations bonding at the very same family vacation home. Create the best outcome for your family by understanding the wishes and needs of the next generation as you plan how to best pass your vacation property to the next generation.
Create a Plan
Set the next generation up for success by creating a vacation property ownership and management plan and put the plan into writing. The plan should direct how decisions are made, how the property is maintained, and who can become a shared owner in the property. An easy way to begin to make a plan is to create a list of all the tasks and responsibilities associated with your vacation property, including the seemingly minor tasks. Now, find a fair way to divvy up the jobs and responsibilities between the next generation of owners. Your plan should contemplate how the vacation property will be maintained financially and physically. Should the property be rented out to third parties to pay for itself, or should each member of the next generation bear some financial responsibility? You may consider creating roles such as property manager, finance manager, scheduling manager, etc.
Plan for Transfer of Ownership
You have several different tools that you can utilize to transfer ownership of your vacation property to the next generation, including family limited liability companies, trusts, and joint ownership, to name just a few. Whichever tool you use, make sure the plan you created is included. These various tools must be set up properly as they have different impacts on your financial, estate, and tax planning. Legal and financial professionals can assist you in choosing the best vehicle for achieving your goals.
Are you planning a move? Rather than sell your house, why not turn it into a rental property? It’s a great way to get involved in real estate investment and make money.
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