Leaving a Vacation Home to Family
Vacation homes create core memories… and some of the worst family conflicts I see.
Every summer at the lake. Ski trips in Vermont. Beach weeks in California. It sounds lovely - and it often is, until the next generation inherits the house.
Here’s the part most people don’t think through:
Leaving a vacation property isn’t just passing down an asset.
It’s creating a long-term partnership between your kids. And partnerships (especially emotional ones involving family) need rules.
There are real benefits to passing down vacation properties. You are gifting:
A property your kids may never be able to afford on their own
A step-up in basis (generally meaning little to no tax if it’s sold shortly after inheritance)
What’s not straightforward is everything that comes after:
If your kids inherit this house together, can they agree on:
Who will pay for repairs (and what happens if someone can’t contribute)?
Who gets the house on high-value weekends (like Christmas or the 4th of July)?
Can people bring guests?
Do heavier contributors get more access?
What happens if one sibling wants out?
If having these discussions is causing conflict now (while you are still around), it should be a wake up call.
We haven’t even gotten to the hard questions yet, such as:
If one person will be inheriting the house (maybe they are the only one in the area), how will the others be compensated?
While it seems obvious that Sue gets the house and the siblings get cash, think about how that plays out. Sue gets a tiny, run-down, multi-million dollar house in a great location and nothing else. Her siblings receive millions of dollars in cash. Is she going to be okay with that? You may choose to exclude the property while Sue lives there and give everyone the same cash amount - but is that fair either? Maybe fairness doesn’t matter! (something I say often to my children)
If each child gets assigned a particular house, how will changes in market value and life situations be handled?
For example, let’s say it is decided that one child gets the main home in San Diego and the other gets the vacation home in Mammoth. What if the houses are not the same value? Or maybe they were at the time of your planning, but that changes by the time you die.
What if circumstances change before the inheritance happens and the person that was originally fine with the Mammoth house isn’t anymore?
The Hard Truth
Most families are not naturally equipped to co-own property (even if one of them is in real estate and even if they love each other). While they may be in agreement now, it can be shocking how things change when different spouses come onto the scene or life changes in unexpected ways.
If your goal is to create lasting memories for your kids, make sure you’re not also creating a long-term source of tension. Create a detailed plan and talk to your kids early and often.
What are your experiences? How has an inherited vacation property worked (or not worked)?
Linda Rogers, CFP®, EA, MSBAis the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout Virginia Beach and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is afee-only and fiduciary wealth management firm offering one-time comprehensive financial planning and ongoing impact-focused investment management in Virginia Beach and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.