“Preserving the Family Vacation Home”		«BACK
	by Scott G. Husaby
	from Spring 2005 Krass Monroe, PA Newsletter

One of the most interesting and challenging aspects of the estate planning process for many of our clients is addressing issues related to their family vacation home. Many of these clients have expressed their desire to retain their lake or mountain home, their hunting camp, hobby farm, etc. as a legacy for their children and grandchildren. This challenge is created at least in part by the fact that the family vacation home raises two important planning issues.

The first issue is to provide for a thoughtful succession plan that will transfer ownership of the property to the next generation or generations in a way that will allow for the continued use and enjoyment of the home by younger generations. This raises a wide array of challenges, including the new ownership structure, ongoing management of the property, payment of maintenance and operating expenses, coordination of the use of the property by the different family members, and providing an exit strategy for family members who do not wish to participate in the ownership and maintenance of the property.

The second estate planning issue raised by the family vacation home is the valuation of the property and the impact it may have on our clients’ estate tax situation. Many family vacation homes have appreciated in value and they now represent a very significant asset in our clients’ estate. If a client is likely to have a taxable estate, planning must be done to ensure that there is sufficient liquidity in the estate to pay the projected estate tax without forcing a liquidation or refinancing of the vacation home. Many clients anticipate that vacation properties will continue to appreciate at a rapid pace, so they are interested in transferring ownership to the next generation in order to remove this future appreciation from their estate. Aging clients are also concerned that the treasured family vacation property may have to be liquidated or at least encumbered in order to pay for long-term care costs if they retain ownership of the property.

There are several estate planning tools that can be used to address the planning issues raised by the family vacation home. These tools include family limited partnerships, qualified personal residence trusts, transfers with retained life estates, split ownership interests, and planned gifting programs. When appropriate, if our clients wish to retain full ownership, we have often carved out of their estate plan a separate trust to retain ownership of the vacation home and provided for funding of the trust to maintain the property for future generations.

Very few family assets are as treasured and emotionally charged as the family vacation home. Failing to specifically plan for the ongoing ownership of the family vacation home, or assuming that it can be treated like any other asset in your estate, creates the potential for significant problems for the next generation. Like any succession plan, the best chance for success comes from careful planning and involvement by all parties in advance.

We would welcome the opportunity to discuss your situation and show you how we can help you develop and implement the best plan for your family.