Don’t Tangle Your Estate in a Tangled Family Tree
In the 1960’s, the Smothers Brothers comedy duo famously complained that “Mom always liked you best.” That was over fifty years ago when the traditional family structure of a once-married husband and wife with biologic children reigned supreme. That’s not the case today. The Pew Research Center estimates that in 2015 only 46% of households fit that model. This new reality raises a variety of red flags when considering how best to bequeath a vacation home to your heirs.
No two families are alike except in one way: they’re all composed of unique personalities. Each family member carries decades-old baggage regarding real or imagined favoritism, rivalries, and slights. More and more families today are non-traditional or “blended” – due to divorce, remarriage, stepchildren, ex-spouses, etc. The Modern Family television show is a far more accurate portrayal of today’s realities than Ozzie and Harriett.
Familial rivalries and slights are magnified exponentially when non-blood relatives enter the picture and must be considered when developing an estate plan. This is especially true when an asset like a second home is passed from one generation to the next. The most bitter fights are not about money but rather about memories – and second homes are treasure troves of family and childhood memories.
Most people want to be fair in how they distribute their assets upon death, but fairness is not always simple. Nor does it mean that every heir receives an identical inheritance in value or kind. Plus, “fairness” is in the eye of the beholder. What you as the donor sees as fair and generous may be viewed quite differently by your heirs. And if you’re remarried with stepchildren, it’s likely that either your current spouse, ex-spouse, ex-spouse’s new spouse, stepchildren, biological children, and children’s spouses will find fault with your best intentions.
Despite these many challenges, a well-crafted and thought-out plan can help ensure that the ultimate outcome matches your intent regardless of how tangled the family tree. Here are some suggested steps to begin the process.
- It’s most critical that the current owners-spouses are in agreement on how best to bequeath the property. Key questions include:
- Do the heirs (some or all) have sufficient resources to pay the ongoing expenses of the property (annual taxes, maintenance, and repairs)? This issue is the leading reason heirs are forced to sell the property.
- Should arrangements be made to pay inheritance taxes or the property’s ongoing expenses? Doing so will likely provide financial freedom and promote family harmony.
- Should the property be included in a trust to prevent distribution outside of the bloodline due to divorce, debt collection, or disability?
- In the case of a second marriage for one or both partners, should the property be owned jointly (with right of survivorship) or individually? Was the property owned by only one previously?
- Identify and address any unresolved emotional issues regarding the property. The fallout of a failed marriage can last many years and fester below the surface. It would be best to address these issues upfront rather than leave them to the heirs to resolve.
- If there are stepchildren, a whole new set of issues pop up driven by the desire to provide for biological children first (a desire that does not suggest a lack of concern for stepchildren).
- If there are substantial age differences between the various children (which is common in second marriages), special planning must be done to protect the interests of the younger heirs.
- Speak privately with each of the adult heirs to learn their expectations, desires and concerns. What you hear may mitigate some or all of your concerns (e.g., some may prefer a cash inheritance, some may live too far away to enjoy the property, some may not be able to afford their share of ongoing expenses, etc.).
Every situation is unique, so we encourage you to contact us with specific questions about how best to ensure that your second home stays in the family.
To learn more, download the “Second Home Succession Planning Primer“ ebook.