For some fortunate individuals, beloved vacation destinations have resulted in the purchase of a family vacation home. Over the years, the home becomes a special retreat where you and your family have celebrated countless milestones and created priceless memories. However, as you plan for the future, you will have to make decisions regarding the vacation home.
Leaving a home to the family:
Often owners of vacation homes want to see that the home remains with the family for generations. However, even in cooperative families, joint ownership and management of property can lead to conflicts. Therefore, before identifying beneficiaries, it is important to consider the dynamics of the family and whether disagreements can be easily resolved between them. For instance, if the home is left to three grandchildren and their parents are all of these people going to be able to effectively care for the property, maintain its upkeep, pay property taxes, and agree on decisions about the property? Further, it could be that some members wish to keep the home while others want or need to sell it and split the proceeds. What would happen in the event the family wanted to sell the home? Also leaving the home to some family members and not others may create resentment and some family members excluding others from the property. Before making decisions, it is a good idea to sit down and meet with those individuals and find out the answers to these questions. From there, you will be able to determine best who to leave the home to and if any conditions need to be set on how the home is used or transferred.
How Best to Transfer Ownership:
In the event that you have decided that you do want the home to be passed to the family, it will be important to plan for the best method to transfer ownership. You can always will the property directly to beneficiaries. However, depending on how many beneficiaries are willed the home, the home’s management and future can become very complicated. For instance, the question of how decisions regarding the home will be made and how expenses of maintaining the home will be paid can remain open and will require consensus among the equal owners of the home.
There is also the option of creating a trust which would be triggered by the death of the owners. Here, the home would be transferred to a trust where it would be managed by a named trustee and terms such as upkeep, use, and sale of the home are dictated.
You may also create a Family LLC or other entity where your beneficiaries hold shares in a company that owns the home, and there is language regarding payment of taxes, the cost of upkeep on the home. When looking at this option, you will also need to take into account the laws relating to “uncapping” of property taxes and other provisions of the tax laws that will affect the transfer of real estate to an entity.
Ultimately, what happens to your vacation home will depend on what you want to happen, the degree to which your heirs can work together, and the most effective form of ownership for your family. These decisions can be complex and will require planning and discussion with you and your family as well as the advice of an experienced estate planning attorney. Please contact us if we may be of assistance. https://www.michiganestateplans.com/