Key takeaways

  • Your family vacation home should be part of your estate plan.

  • Consider family circumstances and dynamics when determining who you’ll leave the vacation home to.

  • A professional trustee is one option for managing the property if you’re concerned about your children’s willingness or ability to do so.

Whether in the form of a cabin or a condo, family vacation homes are more than just real estate. They’re places to spend time together, make memories and enjoy time away from the stresses of life. For these and other reasons, your estate planning strategy should include the transfer of these treasured assets to the next generation.

Skip this important estate planning step and your vacation home could wind up becoming a burden for your heirs, a cause of strife or even a financial liability.

For example, if a family vacation home is simply left to two adult children to split 50/50, that property will become the responsibility of those two heirs. But what if one or both can’t afford to pay for 50% of the utilities, property taxes and insurance on the real estate? What if the property needs a new roof? If they’re not sharing the responsibilities equally, it can lead to disputes among family members.

“That can drive a wedge between siblings and create resentment,” says Corey Digiacinto, vice president and risk management professional at U.S. Bank. "Soon, your vacation home will be more of an obligation than a source of enjoyment.”


How to build your family vacation home into your estate plan

You love your family vacation home and cherish the memories you’ve made there over the years. As you think about passing it down to your heirs, it’s important to balance your wishes with their desires. Here are a few key estate planning steps to follow.


1. Fold it into your broader estate planning process.

Digiacinto has seen many families wait to start the estate planning process, only to realize they should have done it sooner. Estate planning requires a realistic understanding of your family dynamics and circumstances to ensure that a family vacation home and other assets successfully transfer to the next generation (and beyond). This takes time. 

“Do a gut check to make sure everyone is on the same page in terms of keeping the property in the family now and for future generations.” 

Corey Digiacinto, vice president and risk management professional, U.S. Bank

2. Select the best transfer option for your individual situation.

Here are the primary options for passing on a family vacation home: 

  • Sell it outright or gift it to one or more of your children.
  • Establish a trust in which one or more trustees is responsible for owning and maintaining the property.
  • Form an LLC or similar legal entity. Your heirs will be owners and will follow specific governance rules and operating agreements in how the property is used.


3. Factor in the family dynamic.

Parents know their children and the relationships that exist between them best. They also know that not all of them will have that same level of interest or involvement in the family vacation home. “Be aware of that family dynamic and be realistic about it,” says Digiacinto. “Do a gut check to make sure everyone is on the same page in terms of keeping the property in the family now and for future generations.”

For example, you might ask everyone to write down their goals for the family vacation home and its future. Tell stories of the home’s history and your family’s experiences there and explain why you may want to keep the home in the family. This gives you a starting point for drafting a document that allows future generations to understand why you did what you did.

Also, be sure to ask about the level of involvement and work that each family member is willing to put into the property, knowing it will require a financial investment and level of commitment over time. “This will help ensure that your property remains the gift that you intend it to be,” Digiacinto adds.


4. Make arrangements that are flexible enough to stand the test of time.

Digiacinto worked with one parent who put her vacation home in a trust along with some very specific directions about how siblings could use the property (for example, one could use it one year and another could use it the following year, and there were specific hand-off days detailed in the estate plan).

The plan was too rigid and wound up creating issues among the siblings. “It made the beneficiaries feel as if they were tenants versus owners, and they didn’t have much of a connection to it,” says Digiacinto. “When the parent passed away, we were left settling disputes between two grown adults. That's certainly not what the grantor had intended.”

To avoid this problem, include flexibility in your family vacation home arrangements, knowing that circumstances can change over time and may not align well with your original plans for the property.

Approach estate planning for vacation homes early and calmly

When it comes to family vacation home estate planning, the best outcomes happen when you put the time and effort into ensuring that the next generation understands what’s coming. All heirs know what they’re getting and what they’ll have to put into the property to keep it functioning well.

You may want to consider using a professional trustee to manage the property and shoulder some of the workload for your children. “That way,” Digiacinto says, “you’ll be able to make your vacation home into a source of pure enjoyment, versus a burden that can require a lot of work and management.”


Learn about trust and estate services from U.S. Bank.

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