Roy B. Oser, Esq.

It’s hard, at least for some people, not to feel sentimental about a vacation home that has become a family tradition. Parents and grandparents, however, who would like to plan for the place to remain in the family after they’re gone will need to ponder some realistic considerations.

The first one is, do the “children” really want it? If not, best simply to arrange for the property to be sold after you’re gone, and the proceeds divvied up. This would also avoid complications that might arise if the children really do want it. One of the happier of these complications would be if the family grows to the point where, unless the vacation property is a very large one, sharing it may become infeasible. One of the less happy possibilities is that perhaps the children and their spouses do not all get along all the time, and acrimonious disputes might arise.

Assuming the children want to keep the vacation home in the family and they get along, one possibility is to put it into a trust, with money to cover the costs for two or three decades. In that case, a family meeting would be advisable to discuss rules to be included in the trust or in agreements between you and your heirs about how the property would be managed, as well as about the conditions under which the property could be sold.

Who would be in charge, for example, of arranging the scheduling for its use, and how would disputes about this be resolved? Or disputes about pets, if difficulties about allergies to those pets are likely to arise? Speaking of disputes, you would want to take care in the way the beneficiaries are named to ensure that the property would not be lost in a divorce. Who would see that taxes were paid and repairs made and paid for? Or how would these duties be shared? What will happen if an heir fails to fulfill his or her responsibilities?

Over time, a natural candidate for taking over the property from the rest may emerge – perhaps the other family or families live far away, or have acquired vacation homes of their own. Otherwise, the family may eventually have grown to the point where sharing the vacation place becomes infeasible, and from stories I’ve heard about properties that are not particularly large, this is likely to happen by the third generation – the grandchildren’s generation.

Maybe that’s sufficient. But maybe it would be simpler just to designate one able and willing heir for the property, especially if it is a modest property. In that event, the value of the inheritance and the burden of taxes and maintenance may be a wash. If the property is in a state other than the state in which you have your principal residence, you can save that heir the trouble of having the vacation property go through probate in the state in which the property is located by putting it in a living, revocable, trust, with that heir named as the beneficiary. This will not, however, have an effect on estate taxes. It may be possible to remove the property from your taxable estate by selling it, gifting it, or placing it in an irrevocable trust, but there are limitations on how you can do so and you should consult an attorney.

A recent article in The New York Times pointed the way to disposing of the property in a manner that would enable you to do good and do well. The article told of a couple who had paid $20,000 for their vacation retreat in 1965. Keeping up the property had become too much for them, and they had no one to pass it on to. They gave it to a charitable foundation, which sold it for $1.1 million, and, in return, the couple receives monthly income and tax savings (“Giving to Charity Through Real Estate,” November 11, 2007).

A very nice outcome for that fortunate couple. But some of us cherish, nonetheless, our little summer cabin (in Maine, it’s called a “camp”), even though it’s not worth anything like that couple’s property, and we would like it to stay in the family if we have one.