Your vacation home means a lot to you. It’s where you go to find solace and peace. Spend quality time with family. Enjoy a retreat from the everyday grind. Whether it’s a condo by the sea, or a cozy cabin in the woods, it’s your little piece of heaven.
But have you ever wondered if your family members share your same sentiments? When you’re gone, will they continue to enjoy your vacation home and care for it the way you do?
If you want to pass your vacation home to future generations, then it’s crucial to put future ownership plans in place sooner rather than later. The last thing you want is for your special retreat to become a source of stress for your family after your gone. Following are some things to consider when making decisions about the future of your vacation home:
1. Find out who wants the home
Take some time to talk with family members to whom you would consider passing your vacation home. Find out if they share the same feelings about the home as you do. Also figure out if they would be interested in taking ownership down the road.
Ask them to be realistic about the amount of time they would be able to spend at the vacation home. Your vacation home’s new owners also need to be prepared to support upkeep, taxes and other costs.
2. Plan for future costs
Let’s say you are leaving your vacation home to multiple heirs. It’s important to designate who will cover various expenses, or if all costs will be split evenly.
Another idea is to set aside additional funds in an account that is specifically designated for the home’s ongoing costs. A financial professional can help you establish a trust with extra funds to cover such operating costs. This could be a way to prevent your heirs from having to rent the home out during peak times of the year in order to cover expenses.
3. Decide on the optimal form of ownership
There are multiple ways to leave a vacation home to loved ones. The most basic method is to designate the specific individuals you wish to inherit it in your will.
After you die, your estate would transfer the deed of the home to those individuals and each would receive an equal portion. But be aware that multiple people with equal ownership in one property can create some issues, however.
Decisions will need to be made, such as how much to spend on home improvement projects, or whether to rent or sell the home. Those choices can be difficult to make when there are several different opinions in the mix, and everyone has a stake in the associated costs.
Another option is to pass down your vacation home through a trust. That way, one person (designated by you) would be in charge of all decisions concerning the home. In turn, your heirs would become the trust’s beneficiaries. This means they would receive a portion of rent proceeds. They would also be able to use the home according to specific terms set by you.
Talk to a financial expert about the cost of setting up such a trust, as it can vary depending on state laws and experience of the trustee.
4. Set up a plan for selling the home
It’s nice to think your vacation home will be peacefully passed down from generation to generation and always stay in the same family. But this isn’t really realistic thinking.
As the years go by, your heirs will have children and grandchildren that may also share in ownership of the home and eventually take over its responsibilities. But what happens if the majority of beneficiaries want to sell the home some day? You should make a plan for that.
In the trust, you can give each beneficiary the right of first refusal to purchase the house for its appraised fair market value. If none of the heirs want to buy the home, the trust can require it must be sold to a third party, and the net proceeds divided among your descendants as you wish.
The Bottom Line:
Owning a family vacation home can be a great blessing to all who enjoy it over the years. But planning is essential to ensure your home has future ownership established, and will be well cared for when you’re no longer here.