Vacation homes are not only real estate that must be planned for, managed, and maintained – they are also the birthplace of happy memories for you and your loved ones. But have you considered what you want to have happen to the property after you pass away?
The wonderful thing about proactively creating an estate plan is that you get to choose, in a legally binding way, what happens to your money and property. It is important to note that, if you do not create a plan for your vacation property (and if it is not co-owned in an arrangement such as a joint tenancy), your state will decide for you according to its laws and by putting your loved ones through the probate process.
There are 5 main options for handling your vacation property:
1. Give the property outright to a loved one. This person may be your oldest child, someone who has expressed interest in continuing to use the property, or an individual with the financial means to maintain the property.
2. Leave the property outright to a group of people. Because your whole family enjoys gathering together now, you may wish for them to continue gathering at the vacation property after you pass away.
3. Give the property to a group of people as tenants in common and create an ownership agreement. Because there are multiple parties involved, each with their own property interest and personal financial situations, an ownership agreement can lay out each one’s rights and responsibilities.
4. Prior to your death, transfer the property to your revocable living trust to be held for a long period of time or indefinitely. Because the trust is the property’s owner when you die, the beneficiaries will merely look to the trust to see what happens. There is no need for probate, and you can specify any rules you may have for the property and how it is to be held or distributed to one or more chosen beneficiaries.
5. Prior to your death, transfer the property to a limited liability company to be held for a long period of time or indefinitely. Depending on your objectives for the property, transferring it to a limited liability company may provide the beneficiaries with some additional asset and liability protection. The company operating agreement may also specify each company owner’s rights and responsibilities with respect to any company property.
If you are interested in learning more about your options for protecting your vacation property and having your wishes for it carried out, please contact me. You can set up a consultation at (480) 719-7333.