For those of you with memories of good times spent at the family cabin, now may be the time to take action to ensure that future family outings will continue to be enjoyed long after you are gone. In other words, ensure the future of the family cabin and the peace and domestic tranquility of your family through proper estate planning. So, how do you do that? The Wall Street Journal Online recently touched on the topic.
The best way to leave an inheritance that includes a family vacation home depends on who will be inheriting it. That is the first essential decision. For example, are you leaving it to one family member or to several? Who will be interested in the home (or more interested in your portfolio)? Who will be able to use the home? The adult child living in New York might not be able to enjoy the cabin in Garden Valley. This is especially true if they have their own vacation property, or if they wouldn't be able to afford the upkeep, insurance and taxes.
If you've settled on a single person to inherit the family vacation home, then it is relatively easy: you can either gift it during your lifetime (before 2013 would be prudent), or leave it through your Revocable Living Trust. If you are leaving it to multiple beneficiaries, like an entire generation of your family, then perhaps consider establishing a specific arrangement for such ownership. For example, many families find the Limited Liability Company (LLC) or various forms of trusts to be practical tools.
If all of the heirs are adults, then an LLC might be a better bet as it allows members a more equal say in what to do, while still providing a framework for decisions or an organizational structure through the use of a solid operating agreement. Of course, you could take it a step further and form a trust that owns an LLC that owns the home, or even specific trusts like a Qualified Personal Residence Trust (QPRT.).
On the other hand, if there are young children in the family, then a trust with a long-term duration might be better. Why? Because it allows parents to pass on the vacation home to their children while still appointing an adult in charge as trustee. In addition, properly drafted with "spendthrift provisions," such trusts can protect the family home from the potential divorces, lawsuits and bankruptcies of the heirs.
For many, a family cabin is a place of many happy memories shared over a long family history. As a result, it just has to stay in the family. Once you start down the path to make that happen, however, don't wander too far without appropriate legal counsel. You will need experienced help to navigate the details, figure out what's best for your unique situation, and eventually put ink to paper.
It doesn't matter if you're worried about a family cabin, a family business, a gun collection or your grandmother's china you need to make sure your wishes are known and your instructions followed. At Idaho Estate Planning, we have the experience and expertise to help you maintain your options and protect yourself as well as your loved ones now and into the future. Remember, good planning is no accident!