Whether it is the beach or the mountains or on a beautiful lake, many families enjoy time spent together at a vacation home. Before you rush out to purchase this memory-maker, take time to consider some of the following:
What Will Happen to the Property When You Die?
Who ends up owning your property after you pass away depends largely on how you own it. If you are the sole owner, you can make straightforward decisions about how it gets retitled after you die. If you own it as a tenant in common with other owners, you will need to decide what will happen to your interest in the property. If the property is owned jointly and the deed indicates the owners have a right of survivorship, your interest automatically transfers to the co-owner(s) when you die. You can also choose to place your property into a trust or a limited liability company. Doing so will allow the property to remain in that entity. The terms contained in the trust document or operating agreement will state how the property should be distributed upon your death.
What do you want to happen to the property?
If the property is not owned as joint tenants with right of survivorship, it is important that you proactively make a plan for the future of the property. Take note that if the property is subject to probate, and the property is in a different state than your primary residence, your estate may be subject to probate in both states. Some options for a vacation property include:
- Leave the property to a person or group either through your will or a trust.
- Create a limited liability company and title the property over to the company. This helps provide your beneficiaries with some liability protection. The operating agreement will specify each owner’s rights and responsibilities.
- Create a trust and fund the trust with the property. You can create terms that indicate how long the property remains in trust (up until the rule of perpetuities forces the trust to dissolve) and how it is to be used and maintained.
- Instruct in your will that the property should be sold during the probate process and the money received can be distributed to your beneficiaries in the manner you indicate in the will.
Consider Your Beneficiaries’ Wants, Needs and Abilities
Assess whether your beneficiaries can afford to inherit the property. Inheriting real estate comes with the burdens of tax liability, maintenance, insurance and utilities. This step may require you outright asking your intended beneficiaries personal questions regarding their financial abilities. At this point, you should also inquire as to whether they actually would want to inherit a property like this. If you have multiple beneficiaries in mind then consider whether they get along with one another and how they would structure the use of the property as well as share the responsibilities.
If you choose to move forward with the purchase of a vacation property, contact an estate planning attorney to legally document your wishes as they pertain to the distribution of it after you die. You then may need to meet with a financial advisor to ensure that the property can be properly maintained and determine if you need to purchase additional life insurance to ensure estate liquidity for proper maintenance. Contact the experienced estate planning attorneys at Stouffer Legal in the Greater Baltimore area. You can schedule an appointment by calling us at (443) 470-3599 or emailing us at office@stoufferlegal.com.
