It’s hosted countless get-togethers with family and friends. Your grandchildren loved spending summers there; diving into the lake, roasting marshmallows and discovering just how fascinating nature can really be. You remember the first time your grandson caught a fish and the first time he caught poison ivy. In fact, many of your most treasured memories happened there.
The family vacation home holds a wealth of memories and traditions – traditions your family members will likely want to continue after you’re gone. But how can you keep the home safe from outside claims or inside fighting so that future generations will enjoy it for years to come?
Considering the following may help you make the best decision to keep those family memories intact while making way for more memories to follow:
1) If you bequeath the home to more than one person, someone may lose their share in a divorce, someone may not have the ability to pay the upkeep, someone may not want a share in the home or someone may prefer a cash settlement rather than a shared interest in real estate.
2) If you pass the property to your heirs in a “tenants in common” deed, there may be riffs among the owners. Tenants in common can sell off their share to anyone they like.
So, what can you do?
One way to pass title to the home and stave off in-fighting is to form a limited liability corporation (LLC) to own the house. This puts the “collective” over the “individual” rights. The LLC structure gives families a little more flexibility to create rules for governance of the family vacation home, which takes into account the values, history, dynamics and aspirations of the family. Take the Kennedy compound in Hyannisport, Massachusetts – the compound has enjoyed the company of presidents, members of congress, movie stars and news reporters. The compound remains intact for generations to come, no matter which patriarch or matriarch passes away.
The LLC allows people to own units of the LLC that cannot be sold to anyone outside the LLC, nor can their interest be taken in the event of a member’s divorce. In short, it keeps home ownership intact and preserves all your memories.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.