Vacation property requires planning to transfer it to another generation.
For families, summer is a prime time for vacations with children off from school.
For example, did you spend the recent “Labor Day” weekend as the final opportunity for vacation before the demands of school become too overwhelming?
Many people have different traditions.
Some involve traveling to vacation property together.
According to a recent Pauls Valley Daily Democrat “Estate planning for vacation property,” many people want to keep the vacation home within the family.
Transferring property often is more complicated than people expect.
One option is to create a legal entity to own the property.
Two common types of entities are Limited Liability Corporations (LLCs) or trusts.
What are these?
An LLC involves an “operating agreement” to outline how to resolve any conflicts, maintain the property, make financial decisions, and for the general administration and management of the vacation property.
A trust holds property titled to it and allows for the trustee to manage the property according to the terms of the trust itself.
You will need to specifically designate individuals to manage the LLC or trust.
Often these are the individuals who created the legal entity, at least starting out.
When it comes to management, you should detail rules for the transfer of the property.
This may include buy-sell agreements and rights to refusal.
In some instances families choose to limit ownership to blood relatives and not those who marry into the family.
It can be expensive to own and manage a vacation property.
Maintenance, insurance, and taxes cost money.
You should have investments or another stream of income available to pay for these.
Some families create an endowment.
If this is not possible, then the members of the family should have an agreement on how financial responsibilities will be shared.
Use of the vacation home should also be outlined.
Everyone should understand how scheduling will happen.
To effectively transfer you vacation property, you should work with an experienced estate planning attorney to create a comprehensive plan.
Reference: Pauls Valley Democrat (July 29, 2021) “Estate planning for vacation property”