We’re reaching the end of summer, and we’ve heard quite a few stories about family vacation properties. There’s a lot of emotion tied up in the topic. Families go for a good time. They go for gathering. And as this world has gotten so global, this may be the one or two times a year when they all get together.
This kind of conversation usually turns into, “Well, what if we kept this property in the family for the next generation or two?”
At that point, you have to think about the estate planning perspective. In our experience, families often need clearly defined rules for the next generation to keep things healthy. Most families don’t have them.
Identify Who’s Realistically Interested in Using It
Before you determine how a property will be used, you need to start with who will be using it. Here, we need to visit questions like:
- Do your kids have their own desire to keep the property?
- Does geography affect their ability to reach and enjoy it?
- Who will be responsible for the cost of maintaining the property and the taxes?
Determine Fair Rules For Usage
More often than not, clear boundaries are immensely important to keep things healthy. I’ve experienced this myself. In my situation, the families would:
- Sit down twice a year with calendars and do a sports-style draft to pick which weeks we all wanted.
- Rotate who got the 1st, 2nd, and 3rd+ picks each year. (No, you can’t have the 4th of July parade every year.)
- You could ask to swap weeks, but there was zero obligation to switch.
And when is it getting used? We recommend taking a page out of AirBnB’s playbook. Establish checkout procedures and times. Establish what condition you want the house left in for the next visitor. Other questions are worth asking, such as whether the group is okay with families renting out their weeks.
These kinds of rules are helpful to make as policies instead of reacting to tense situations. The other rule? You can’t be mad when others tell you “no” when you ask for an exception.
Pack the Parachute
One final thought–sometimes, the plans change. Maybe it’s not being used as much as everyone hoped. Maybe one family unit’s financial or health circumstances have changed.
If you want your property to remain a positive influence on the family, you have to have a known plan that lets people out when their ability to use it has changed. Critically, you need to do it in a way that doesn’t overload the remaining inheritors with too large of a burden.
Do the Work, Make the Plan
Like everything else in your financial life, having a plan for your money can help preserve our most important relationships. It takes work, but it’s one of the greatest gifts you can give your inheritors. Make money a positive influence in your family.
