The Vacation Home: A Blessing or a Curse for the Next Generation?

 In Second Home Savvy

The vacation home…It evokes the picturesque cottage by the water or in the mountains.   The home may be the Kennedy compound, Shrek’s humble “Swamp,” or something in between. But when everyone in the family, from Grandpa down to the youngest grandchild down muses, “I love this place… I hope we can enjoy this spot forever!” it’s not just a vacation home, it’s an heirloom property.

There are many welcoming qualities that make the heirloom property worth holding on to – good times with family, the vacation community that is quaint or known for its many leisure activities, and the proximity of nature, for example. Children grow up coming to this special spot and later bring their own families. The collection of memorable times can end up spanning several decades if family ownership of the cherished home is allowed to continue.

For this author, “heirloom property” describes my grand-parent’s home on Lake Ontario where I spent many happy summers. Where the vacation home story goes sour for me, as for so many heirs, is the mis-handling by well-meaning but ill-advised relatives.

My grandparent’s cottage is now unused and empty, quickly going to wreck and ruin.

Passing down the keys

Despite parents’ good intentions in leaving the second home to their children, serious obstacles face the offspring in inheriting that treasured dwelling. Management and finances are major problems for even the most organized and well-heeled children. Worse still are differences in opinion that formerly went unspoken. In my experience, lack of planning for the inheritance of the vacation home will turn what was a prized slice of heaven – into a shared piece of hell!

These are some of the ordinary, recurring difficulties of owning the vacation home together:

  • Charging each family member for expenses and usage.
  • Deciding what maintenance or improvements should be undertaken and at what cost.
  • Should the home be rented to the public?
  • Buying out siblings who want the money and threaten to partition the property.
  • To whom can each owner bequeath his interest –spouse, partners, children?
  • Dealing with individual owners’ issues that threaten all owners.

Take the issue of divorce, for example. In divorce the spouse of an owner can demand to be bought out, often requiring a sale – meaning everyone loses because of the difficulty of just one owner.  Estate taxes on an owner’s estate, collection of a debt against one owner, and a disability or nursing home expense that besets an owner are other common examples of individual’s problems that put the ownership of all owners of the property at risk of a forced sale and of breaking up the heirloom for good.

This pattern of difficulties with inherited homes is totally predictable and may be repeated time and again over the years with each inherited property, until there is a final breakdown. If, however, the senior generation does estate planning that is specifically designed to provide for protection of the home being transferred, then the chances of successful inheritance are increased exponentially. 

Organize and get along – or sell!

Having witnessed many families lose their vacation property and their relationships suffer has led me to advise that planning to protect the home is not an option. It is a necessity, like replacing the roof before it leaks, or carrying homeowners insurance.

As part of Heirloom Property Planning, owners are advised to transfer the home to a trust or limited liability company that lays out (a) rules for all aspects of the future co-ownership, (b) funding with an appropriate kitty, and (c) protection against both current and future co-owners’ risks.

The heirloom property should be run in a realistic manner, providing for funding from the parents if possible, and usage fees, dues and other examples of commitment from the heirs.

These steps allow for lean years when neither the kitty, the incomes of the children nor the rental market can support the home.

To be fail-safe, the agreement also needs mechanisms for buy-outs of heirs who do not wish to stay on as owners, mortgaging or even sale if times get tough. 

The children and grandchildren who inherit the vacation home will be glad their forebears had the vision to impose structure and funding or, if necessary, an orderly sale of the heirloom property. If heirloom property planning results in passing the property down to second and third generations, terrific!  Alternatively, if it provides for a smooth sale and allows heirs to move on with their lives, then that in fact may be the best result.


Tim Borchers, AEP®, Attorney
Tim Borchers is the founder of Borchers Trust Law. He offers expertise in next-generation “Inheritance Trusts,” total probate avoidance techniques, asset protection for elders, professionals and others concerned about potential liabilities, and retirement trust, charitable, giving and tax planning. He is the author of multiple articles on a wide range of estate planning topics and has developed numerous trademarked programs and resources that make the estate planning and probate processes more accessible, organized, and easily maintained. He has been a frequent lecturer and author for estate planning and probate courses and has participated in multiple expert panels. Also, he has been a speaker for the Guardian Publishing Speakers Bureau for medical professionals and societies. Tim hails from New Hampshire’s Great North Woods where he learned to love hiking, camping, and scouting (he is one of five in his family). Tim and his wife, Ruth reside in Medfield, Massachusetts and have been blessed with eight beloved children, including four by adoption.
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