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A House Divided

Estate Planning

To keep your shared vacation home an oasis, you have to plan ahead with your family members

If you’re on the cusp of buying a vacation home, it may be very tempting to ask your parents (or your adult children) if they want to go in on it with you. After all these are people you know, people you may want to spend vacation time with – and people with whom you can split all the costs. A second home certainly comes with plenty of expenses, including mortgage payments, association fees, repairs, upkeep, landscaping… Dividing those costs may not be the primary reason to buy a joint property with your parents, but let’s face it, it’s a pretty good reason. 

Here are some things to consider:

Have a Detailed Plan

Even apart from the basic housekeeping questions, there are many other issues to be dealt with, such as how the expenses and upkeep will be shared. As members of the ownership group get older, keep in mind that their responsibilities might change over time. Anticipate and discuss as many of these issues as you can.

Make It Legal

 Buying real estate is a highly legalistic proposition, so have a lawyer draw up a contract about how the ownership will be divided, what happens if someone exits the partnership, etc.

Know How It’s Being Divvied Up

It is almost inevitable that one member of the family will want to use the family vacation home more than others. Make sure this is accounted for and agreed upon so that it won’t cause any hurt feelings of inequity. You should also plan for family members who may end up living at the property for extended periods of time.

Set up a Joint Bank Account

The easiest way to keep track of the finances for the new property is to set up a joint bank account dedicated to it. The mortgage payment, property taxes, insurance, and any other recurring fees can be paid out of it, saving time and headaches for everyone who is contributing to that fund.

Make Sure All the Family Members Are Happy With It

Once you’ve bought a vacation property, the impulse will be strong to spend much or all of your vacation time there. Make sure everyone involved – such as a spouse who may or may not be thrilled to spend every holiday with their in-laws – is on board with this decision.

Put It in an Entity

You may want to own the property through an entity structure such as a limited liability company (LLC) or family limited partnership (FLP). These can provide a convenient way to deal with the property’s finances, formally outline everyone’s rights and responsibilities, and protect your other assets from liability in case of a lawsuit. And the entity structure makes it much easier to transfer partial ownership to another family member or other buyer.

Have an Exit Strategy

Before you get into a joint ownership situation, know how you’re going to get out. If one party wants to sell, does the other party have the right to buy their half? If so, how will the property be valuated? What happens when your parents pass away? It’s not an easy conversation to have, but it’s important to have that strategy in place before it becomes necessary.

Legacy issues are very important here. If your parents pass away, does their share of the property go to you as their co-owner, or is it divided among their other children? A vacation home becomes part of the older generation’s estate, so your Baird Financial Advisor can help the generations work out some of these issues.

Again, going back to step one, it’s important to make these things legal and to plan accordingly. And if these conversations are awkward for you and your parents to have, The Popovich Financial Group is always there to help.


Baird does not provide tax or legal advice. Please consult your legal or tax professional for specific information.

The information reflected on this page are expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances.