Do I need an estate plan? Or maybe you think you don’t. Well, think again!…
We often think of estate planning as a way for us to protect our wishes and our vision of how we want to leave behind our legacy. However, when we take the time to think about it, we realize there is more to consider than our wishes alone. One example is passing down the family vacation home.
Most people equate such a thing to handing down a family heirloom that has been, and will continue to be, cherished for generations to come. But… not everyone in the family may see it that way. While some may cling to the sentimental value, others may wish to sell the property or otherwise have nothing to do with it.
This could become especially problematic when all children inherit equal rights to the property, but do not feel equal about it. While it seems treating all the children equally would be the “fair thing” to do, it could actually become a point of future friction.
For example, Sibling One pushes to have the property sold in order to split the proceeds, while Sibling Two wants to keep it in the family to pass down to future generations. Say in this example Sibling One asks to be bought out (to be paid for his or her share in the property to transfer his or her right of ownership), and Sibling Two does not have the money to do it. Sibling One could force the sale of the house, which could cause serious damage to familial relationships in a way money could not fix.
While we all hope such a thing would not happen, we must also consider realities when planning, and this includes peoples’ personalities and relationships. It becomes much more than simply conveying your wishes. It requires navigating through potential hazards in order to properly effectuate your plan. As far as deciding how to leave behind the family vacation home, there are a variety of solutions, but the following are among those commonly used:
Have the property sold
If you believe the above scenario is a possibility you may foresee happening, or if you believe the house could become a point of contention amongst your children, you may direct the house be sold and the proceeds distributed equally to each child. You may also include an “option to purchase” for any child that may wish to purchase the property from his or her siblings. This is otherwise known as a right of first refusal, where the property is offered first to the beneficiaries before being placed on the market. In said option, you could dictate how long a child may have to exercise the option to purchase and if no one chooses to, the children could simply proceed with the sale of the home. While this may seem similar to the scenario above, the main difference is that they are being given the options by you as the planner, and more importantly, as their parent. This option provides greater flexibility and leads to more amicable outcomes.
Place it in a trust
If you would like to preserve the vacation home as part of your legacy to be passed down from generation to generation, you may put the property into a trust. You would also appoint a trustee to manage its preservation. Other benefits of placing the property in a trust are avoiding probate, and its ability to be a vehicle that protects the house from possible future creditors, especially if you should ever need to apply for Medicaid.
The above are merely two examples of what you could do to ensure you pass on your legacy the way you envision. While not everyone will always be happy with the decisions you make, it is always better to plan for as much as possible in order to avoid conflict, strife and waste.
There is no one-plan-fits-all solution. Each situation and family dynamic is different. Thus, your plan must be tailored specifically to you and your circumstances. Here, at Russo Law Group, we take the time to get to know our clients. It is important for us to hear your story and to learn about your wishes so we may determine the best way to create and effectuate your customized plan.