If you are fortunate enough to have a family vacation home, you know the emotional value it holds for every member of your family. Many cherished family memories are rooted in a special place, which makes it important for current and future generations to preserve it properly. Here’s How to Preserve a Family Vacation Home with a Trust.
A Wall Street Journal article explored the use of trusts to preserve a family vacation home. A trust is often a good choice when the current owners – parents or grandparents – are concerned that joint ownership could lead to disagreements or that maintenance costs may prove too great for the next generation to manage.
Instead of dividing ownership, you can establish a trust to hold title of the property and fund an endowment to handle maintenance expenses. In addition, to avoid paying custodial fees to the trust, you can set up a limited liability company to hold the endowment within the trust.
Once the LLC is registered in the state where the vacation property is located and the trust is created, the next step is to draw up a legal operating agreement that specifies when the property title and endowment would pass into the trust, usually upon the current owner’s death. The operating agreement would also detail how the property is to be used, and grant each member of the next generation the right to equal access to the property. This is usually preferable to granting equal shares in a property since it prevents any one shareholder from cashing out his or her share and jeopardizing the use of the property by future generations.
As the WSJ article noted, it is usually preferable to have succeeding generations designate a property manager from within the family to make the key administrative decisions and coordinate the use of the property so it is shared equitably.
Using a trust can help guarantee that a beloved vacation home is preserved for generations to come, as well as preserve the family harmony that the home has played such a key role in developing.
A Note from the Attorney, Stan Pierchoski:
The practice of law is a second career for me. After obtaining Master of Science degrees in both Nuclear and Mechanical Engineering, I worked in the Nuclear Power Industry for 15 years. Always having an interest in law, I attended and graduated from law school and founded the Pierchoski Law Firm in 2002 in Pulaski, TN. For several years I practiced as a criminal defense, trial attorney. After my parents passed I became interested in Trust and Estate Law and felt a strong calling to change my practice to the Estate Planning area.
For years I have been exclusively doing trust writing and wealth planning and have become proficient at it. Over the last several years my practice has evolved to serve all age groups including elders and Medicaid Planning. I am always open to your questions and am more than happy to chat with you about your concerns so give me a call or stop by my office. You’ll be glad you did!