All About Estates

Vacation Property – Keeping it in the family

This Blog was written by Natalie Melanson, Estate and Trust Advisor at MD Private Trust Company which is part of Scotia Wealth Management

As we are now nearing the end of September, we know or hear of many people who are in the middle of closing up their vacation homes for the season before the cold temperatures and snow arrives. Now that summer is over, this new season tends to make people eager to tackle their to-do lists, which I have noticed often includes their estate plans. Planning on how to distribute your vacation home on a second death is an important part of an estate plan, as family members almost always have an emotional attachment to this beloved asset. As it happens, this is the topic of conversation around my kitchen table as my parents are in the middle of reviewing their own estate plans, and some of the focus has been discussing the division of the family cottage between myself and my two siblings.

For most parents, their wish is to have all of their children inherit the vacation property equally between them, as they seemingly believe that their children love and cherish this family asset as much as they do. In some family situations, the equal division of the property can be successfully managed jointly by the siblings after the parents’ death. Nonetheless, the opposite is also true where conflict and disagreements between the siblings and their spouses can tear the family apart, which is likely the opposite of what the parents had envisioned when they made their final decision. Here are some of the considerations that should be included in any family discussions dealing with how to pass down the vacation property to the next generation.

Financial situation of each child

The financial stability of each child is a very important aspect to consider when thinking of who will inherit the vacation property, which would likely be that child(ren)’s second property. With that brings about additional expenses, above and beyond their own family’s cost of living, for the beneficiaries of the property.

Parents need to seriously contemplate if all their children would have the capability of equally sharing the financial burden of the maintenance and care of the property. They might conclude that one or more of their children are just unable to take on this extra financial strain and will be unable to contribute financially to the upkeep of the property. If the vacation home is divided equally between the children, and only one of the siblings has the financial means to take care of it, this could lead to friction and resentment between the siblings caused by the unequal monetary contributions towards the property.

Who is willing (or can) do the work?

Opening and closing the vacation property every season, paying the monthly bills, repairing and upgrading the property, inspecting the septic tank, and landscaping are some of the responsibilities of any vacation property owner. Owning a secondary property can be very time consuming depending on the age of the structure and the lot size. The child or children inheriting must be willing to put in the time and effort and be deliberate in making the commitment to visit the property on a regular basis during the season.

It is essential that parents reflect on each of their children’s respective abilities, willingness, and interest to routinely maintain the property during their lifetime if the plan is to keep the property in the family. It might come to a point where, unfortunately, the best decision and course of action in the estate plan is to sell the property and divide the funds equally between the children as no one has the capacity or eagerness to look after the vacation home.

Would joint ownership work?

If joint ownership between siblings is being considered, there are additional issues that need to be addressed, namely, joint tenant ownership, or tenants-in-common ownership.  This option brings with it pros and cons, the details of which we will not examine as part of this blog post today. Typically, if the intent is to have the vacation property continue to be passed on from one generation to the next, the joint ownership between the siblings should be tenants-in-common. Having said that, it is important to seek legal and tax advice when it comes to joint ownership, as the lawyer can go over the situation with the clients and advise which type of ownership would be appropriate for their situation.  The lawyer may also suggest a co-ownership agreement that can set out the terms of the use/upkeep of the property and what happens upon death or sale.

Do they really want it?

At the end of the day, the most important factor is for the parents to have an honest and open discussion with each child to see if any one of them is truly interested in inheriting the vacation property. Some parents might be shocked to find out that one or more of their children have no interest in taking over the family cottage and would prefer other assets from the estate of equal value. It might also become clear during these conversations if a child should be inheriting the vacation property as sole owner, which could possibly diminish the odds of any future disagreements once the parents have passed.

If your goal is to leave your cherished vacation property to your loved ones, being prepared and having open communication and proper planning can help ensure family harmony and family gatherings at the vacation property long after you have gone, even if the cottage is not “joint-tenants between all my children”.  Perhaps at the last family gathering of the season, it might be a good time to ask your children what they envision happening after your passing to begin the family discussion.


Thanks for reading!

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