Many people buy a second property in retirement, one that’s used primarily for vacations. You may enjoy seeing your children, grandchildren, and other relatives gather to celebrate holidays and other occasions. Overall, about one in 10 homeowners have a second home.
Trouble can arise, though, when a vacation home passes to the next generation. Suppose Paul and Barbara have a beach house. At their death, they want to leave the home, or its value, equally to their three children. However, one child loves using the beach house, one has moved across the country, and the third prefers to cash in this valuable property. The result can be a serious disagreement among the siblings.
Some possible steps can avert such an outcome:
* Sell the house. Paul and Barbara can sell the house as family use dwindles. Or, Barbara can sell after Paul’s death. The cash can be divided among the children.
* Leave the house to the estate. If Barbara is a widow who is the sole owner of the vacation home, she can leave the house to her estate and instruct her executor to sell. Again, the children can receive cash from the sale.
* Adopt a sophisticated plan. If you really want a vacation home to stay in the family, transfer ownership to a trust or to a limited liability company, while you’re alive or at your death. Arrange for the trust or LLC to have funds to help pay ongoing expenses. The arrangement might include some procedure for buying out family members who no longer want to use the house or pay any of the related costs.