If you own a vacation property that you are considering passing on to the next generation here are some questions to help you with your decision-making:
- Is the property one-of-a-kind and irreplaceable? If you own a condo in a warm climate that's an asset that could theoretically be more easily replaced by your heirs, than say, a private island in Maine. If your descendants made a lot of money would they be able to buy into something similar in the future? In the case of the condo there's a higher likelihood that they could find something comparable in the future, but there are few private islands for sale.
- Are your descendants likely to be able afford to own the property? Is there an agreed-upon plan in place for sharing the cost of ownership and upkeep? It may be that no individual can afford the place on their own but by sharing use and costs, siblings and/or cousins and their descendants can maintain and enjoy the special place.
- Do your children/grandchildren want to inherit the property? It's definitely worth sitting down for a heart to heart to hear their thoughts. If some but not all want to continue ownership is there a way to compensate those that want out? Is everyone comfortable with that arrangement?
- Do you have a structure in mind for descendants to share the property without it becoming a financial or an emotional burden? You should consult a lawyer about potentially setting up an LLC (in the US) to limit personal liability. A lawyer will also be able to help you with drafting an operating agreement that sets out how decisions should be made, the rules for use, and how someone can exit without negatively impacting the other owners.
- Do you want to restrict development? For example if the property has undeveloped acres in an area of outstanding natural beauty? Consider contacting a land trust to discuss setting up a conservation restriction. This can also help with reducing the tax bill.
- If you have answered all of the above and plan to keep the property in the family do you have a system in place for fair sharing of use and expenses? Resercal was designed to reduce the admin time and stress that can be associated with sharing property. Contact us to set up a demo or free trial of our private group scheduling app. We also offer consulting services and/or can direct you to land trusts and specialist attorneys. Please do get in touch with your questions.