Some families are fortunate enough to have bought a vacation home, and can share that property with those they hold dearest. When the time comes to create an estate plan, some in New Jersey are unsure how to address their vacation home within the scope of their estate planning tools. Fortunately, there are a number of ways to handle a second or vacation home, which means that there is a solution available for virtually every scenario.
The first step in addressing how to pass on a vacation home is to determine if one’s children want to retain the property. This is best accomplished in a sit-down discussion with all parties present. If the children want to keep the home, the discussion should include the costs of maintaining the property, including taxes, upkeep and routine maintenance. This is also a good time to work out an agreement on who will have the right to use the property, and how the schedule might work if siblings do not want to make use of the home at the same time.
Next, individuals must create the means by which their chosen heirs will inherit the property. A vacation home can be placed within a trust or Limited Liability Corporation (LLC), which gives parents the ability to transfer ownership to their children over time, while still retaining control over the property. By gifting the home to heirs over a number of years, parents can make use of the annual gift tax exclusion, which can save a significant amount of money.
When setting up the inheritance of a vacation home, it is also important to provide a means through which a child can be “bought out” of the property if he or she chooses. This allows each heir to have an exit strategy if things change in the future, and also gives the other heirs the ability to retain the home for their own use. When parents take these steps and complete the proper estate planning documents, passing a vacation home on to loved ones is easier than many in New Jersey anticipate.
Source: elderlawanswers.com, “Estate Planning for a Vacation Home“, Oct. 17, 2014