As the holidays approach and travel plans take shape, you may be fortunate enough to be looking forward to a journey to a vacation home. Whether at a ski resort, a tropical beach, or a wooded lakeside cabin, many families gather at their vacation homes collectively, with multiple generations sharing the space at once, or take turns using it with their smaller nuclear families or groups of friends. If you own a vacation home, you should consider whether and how you want to keep it in the family. Your estate plan should consider gift and estate tax issues, how to fund carrying costs, and family issues with regards to how to equitably share access to the home.
Following are some ways to structure gifts or bequests of vacation homes to keep them in the family and minimize the tax impact.
If your vacation home has a relatively small property value, or if your family is large, you may want to gift shares of the property to heirs. Read more>>
Also called "living trusts", a revocable trust is a trust you can change, modify, or revoke at any time. Read more>>
Qualified Personal Residence Trust (QPRT)
A QPRT enables you to pass on your home or your vacation home to your children while retaining the right to live in it for a specified period of time. Read more>>
If it is important to you to hold onto a family home for future generations, beyond just your children, a dynasty trust may be the best vehicle for you to use to pass it on. Read more>>
General Partnership (GP) or Limited Liability Company (LLC)
By employing a GP or an LLC to own the property, you can avoid challenges of local transfer taxes or ownership by minor children. Read more>>
In addition to structuring the gift, you may want to create a written agreement for your heirs to minimize the likelihood of disagreements. Read more>>
One other issue to consider is the use of conservation easements, particularly if there is a significant amount of land involved. Read more>>
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