We have a few clients who have vacation homes and the article in Financial Advisor IQ seems to cover the issues involved when it comes time to pass it on to the next generation.
There’s the issue is who gets to use it and when.
Advisors’ challenges can include helping adult siblings negotiate, say, who sleeps in the bedroom with the ocean view.
While the parents are alive, they set the rules. Once they are gone, the potential for conflict escalates.
In some cases, one sibling lives near the vacation house and can use it often, while others live far away. One solution, says Mossanen, is to turn it into a rental property. For example, two siblings could rent the home to strangers for $1,000 a week and split the income, and rent it to each other for $500 a week. “That equalizes things,” Mossanen says.
Who will take care of the property?
The sibling who lives closest to the house is likely to be the one who goes running when the roof starts leaking — another potential source of conflict.
Suppose one sibling wants to keep the home another wants to sell, what are the tax consequences. Often it’s best to put the property up for sale but give the siblings the right of first refusal. Read the entire article for some additional ideas.