The vacation home can be an important piece of property for you and your family. If you want to give it to your heirs for future generations to make memories in, you should start thinking about how to include it in your estate plan. But this requires more than just creating a document if you want to prevent future family feuds.
If you leave the vacation home without any explanations, your beneficiaries may deal with a lot of confusion, disagreements and misunderstanding. Here are some ideas for how to pass down your vacation home with minimal complications.
Find out who wants to own it
Making assumptions is a common estate planning mistake. But you do not want to leave your home to a child or other family member who does not want any part in it. An heir may prefer a more liquid asset or not want to share the responsibilities of the vacation home with others. Transferring ownership to someone who has no interest in the property will only create problems for your family.
Consider a family limited partnership or trust
A popular way to transfer ownership is by setting up an FLP or trust. This often makes more sense than transferring the real estate directly. You can give ownership shares according to the gift tax limit.
One of the best reasons to have an entity own the vacation home is that you can create an operating agreement or trust document. This document can address maintenance, schedules and fees. It can be difficult for families to figure out how to split usage time and repair expenses. The existence of such a document makes all this straightforward and easy to follow.
Prepare for the worst-case scenario
Eventually, it may not be realistic for the vacation home to stay in the family forever. You can plan how you would like a sale to go under certain circumstances.