Financial Planning for a Vacation Property
If you own a beach house, or any other vacation property, it is a place to get away from the stress of everyday life and enjoy quality time with family and friends. In addition to the sentimental value, a vacation home typically has significant financial value as well, particularly if the property has been in the family for a long time, and the value of the home continued to grow over the years. If you are fortunate enough to own a second home, you will need to decide what will happen to the property when you pass away.
To avoid confusion and disputes between family members, it is highly recommended that you discuss your plans with your children so there is no question about who the house should go to, and whether all your children want the responsibility of owning and maintaining the home. Your children may not fully understand the financial responsibilities associated with owning a vacation home, including maintenance costs, insurance, repairs, and property taxes.
Options for Estate Planning
There are several options available if you own a vacation property and wish to leave it to your children:
Leave the property to children outright: While this may seem like the simplest plan, it does not account for things that can go wrong, such as when two family members have very different ideas about what to do with the property. Parents often assume that the children will either keep the property or work it out amongst themselves. Unfortunately, this is not always the case, and they run the risk of a partition sale. In a partition lawsuit, a judge will either physically divide the property, or sell the property and divide the proceeds. In most cases, the judge will order that the house be sold, rather than divide the property.
Limited Liability Company: Another option is to put the property in a trust or a Limited Liability Company (LLC). The benefit of an LLC is that you can transfer interest in the LLC to the children, while regaining control of the property. You can also use the annual gift tax exclusion to gradually gift your children additional interest in the LLC. The LLC agreement can help avoid conflict and confusion by providing specific instructions about maintenance costs and property taxes. LLCs can also protect the property from creditors.
Qualified Personal Residence Trust: A qualified personal residence trust (QPRT) allows you to continue living in the home for a specified period, where children take over ownership of the home. This reduces taxes on the property, but there will be no tax savings if it is not set up properly.
Brooklyn Elder Law Litigation Lawyers at Korsinsky & Klein, LLP Help Clients with Estate Planning
If you own a vacation property and you wish to leave it to your children, the highly qualified Brooklyn elder law litigation lawyers at Korsinsky & Klein, LLP will help you with all aspects of estate planning. We will address all your questions and concerns and ensure that your assets are protected. To schedule a confidential consultation, call us today at 212-495-8133 or contact us online. Our offices are in Brooklyn, New York, and Lakewood, New Jersey, where we represent clients throughout Manhattan, Long Island, and Westchester, New York.