Many Los Angeles area families have a vacation home. It may be a getaway cottage in Big Sur or a place farther north in Napa or Sonoma wine county. Regardless of the location, when people draft their estate plan, they generally leave the property to their children.
While it may sound great to inherit all or part of a vacation home, that inheritance can come with a hefty price. There are property taxes, maintenance and potentially a mortgage. If it hasn't been used for awhile, extensive upgrades may be necessary. Then there's the issue of who gets it on special holidays like Memorial Day, Fourth of July, Labor Day and New Year's.
The costs associated with a vacation home may be more than heirs can afford to manage. An inheritance that's meant to be a generous gift can result in uncomfortable disputes and leave those who are unable to pay to keep the home out in the cold.
One solution is to make the property a limited liability corporation. Under an LLC, the owner(s) can:
-- Put in place a management structure, including a calendar of when the property will be used and by whom
-- Designate conditions for the sale of the property, including whom it can be sold to and for how much
-- Provide funding for help with upkeep of the property
Parents can transfer shares in the LLC any time while they're alive or wait to have the transfer made after they've died.
As with any asset that you intend to leave to a family member or other heirAA, it's wise to find out whether they even want it. Discussing your estate plan with your family when you develop it is a good idea. It may be uncomfortable, but it can save conflict among family members after you're gone. Your California estate planning attorney can help facilitate these conversations and answer any questions that you or your family members have.
Source: Boston Globe, "Leaving the summer cottage to your children? Consider an LLC," Lynn Asinof, Nov. 25, 2016