Looking to the future

What’s the best way to pass down a family vacation property?

Long a symbol of middle-class success, second homes have become almost unattainable for many younger people as real estate prices have soared. As a result, many older summer-home owners have found themselves hosting the extended families of their adult children.

Often the setting of fond memories, a modest mountain cabin, rustic lakeside retreat or house by the sea can quickly become a source of friction when the original owners die or become too sick to enjoy the property.

The best way to avoid conflict, experts say, is for families to communicate clearly about the property’s future while the original owners are alive and healthy. It may be an unpleasant topic, but not talking about it is a bigger mistake.

“The whole uphill battle is to get people to deal with these taboo issues when they can rather than when they have to,” said Steven Hendlin, a psychologist and author of the book, “Overcoming the Inheritance Taboo.”

Rather than try to address the matter by phone, e-mail or fax, Hendlin and others suggest you hold a family meeting.

Deciding in advance out who will get a treasured piece of art or mom’s best pearls will ease future squabbles. Dealing with a piece of property can be more complex, however.

A number of legal vehicles can be used to arrange for joint home ownership, from a trust to a limited partnership or limited liability company. Corporations are usually not a good tool, because they are subject to more taxes. Getting good legal advice at the start can save a family decades of headaches.

Many home owners believe if they do nothing, the land will simply be equally divided among their heirs. Usually known as “joint tenancy,” or “tenancy in common,” this works fine for some families, but also can bring disastrous results.

What often sinks families is the shock of dealing with ongoing costs. When possible, experts recommend establishing an endowment or some other method of dealing with expenses like property taxes, insurance and repairs.

Another thing to consider are the wishes of the heirs: Not all of them may want or be able to afford the responsibility of maintaining the home.

In cases where one sibling is more or less wealthy than the others, there may be some resentment. If one decides he or she doesn’t want a stake in the property, the parents should discuss leaving that child something else instead.

If keeping the property in the family is the goal, then a structure should be put in place for making decisions about the home, said Olivia Boyce-Abel, a consultant on family land issues in Santa Cruz, Calif.