In 1895, George Vanderbilt II completed construction on his family’s vacation home in the Blue Ridge Mountains of North Carolina. It was his vision to have a quiet place for his family to retreat to. It was his vision to have a place for friends to gather. In this vision, he created Biltmore, the largest privately owned home in the United States. Do you think George Vanderbilt considered that Biltmore would become a tourist attraction and vacation destination centuries later? Highly unlikely that he thought that far ahead.
Fast forward to 2018, and it has been a fantastic summer. Maybe you soaked up some sun on the beach, or revived yourself in the Blue Ridge Mountains on vacation. Maybe you frequented your favorite escape, your family vacation home. Vacation property is a place that can hold many sentimental feelings for so many families. Learning to swim in the lake, horse back riding on the trails, or enjoying your private beach bonfire is the reality for so many people. At what stage, do you begin considering “what will happen to this special family place after I am gone?”
Now is the time to protect your property investment for your family’s future generations. By having your vacation property included in your estate plan, you can ensure longevity of ownership while avoiding potential family squabbles.
To help in the decision making process, here are a few points to consider when including your vacation property in your estate plan:
- Who are the likely heirs, and do they want it? This is important to consider. While many sweet family memories were made there, do the likely heirs have time to visit the property? This is definitely a conversation to have with your family. Taxes, upkeep, travel time to the destination are all valid points to consider.
- What makes most sense for ownership? The easiest method is to leave the property to your heirs in equal portions, as state this in your will. However, it may not be as easy for your descendants. If one child wants to rent it out, and another wants to sell it this could easily become a family war. To avoid this type of conflict, you can place your vacation home into a trust. You would then name a trustee, who would assume all decisions regarding the property. Then your heirs would be the trust’s beneficiaries. As a beneficiary, they would receive any profits made from the property, but the trustee would make the ultimate decisions to reduce any disputes.
- What kind of upkeep should be considered, and who will pay for it? Your heirs may not be willing or able to cover these expenses with their own money. As you are planning your estate plan, you may want to designate specific funds to cover the upkeep of the property. Many families opt for a trust to take care of the upkeep, and then the beneficiaries can still reap the full benefits of the property.
- Do you have an end game? You may want to consider an order to sell the property if a certain event occurs. Generations after generations may enjoy the property until they are only distant relatives that never knew you personally. If a trust is established for the property, an order of sale can be forced on the property if an undesired event occurs. This could provide the first beneficiaries first right of refusal for the property, otherwise it will be sold at fair market value.
Owning vacation property is a blessing to so many. The decision to pass the property on for future generations is a priceless gift for future enjoyment. In the process, ascertain the right approach to protect your family’s future vacation memories.
