For many families, great memories have been made spending time off together at a family retreat, cabin, or vacation home. Normally, this is a property that has been in the family for decades -if not for many generations- located in a vacation spot which everyone enjoys.
Most often the property was bought and owned by just one family until successive generations came along. It represents a safe haven from the world and work which allows all family members to periodically escape. As time passes, it is not unusual for the ownership in the property to be shared with other family members via gifting, inheriting, or purchasing of interests in the property.
Without foresight and adequate planning, shared ownership in the family retreat can be the cause of future misunderstandings and heartache. Differences of opinion regarding use, décor, damage, and funding can become so disruptive, that disputes regarding the family home can flow over into family relationships and holiday gatherings.
Managing and enjoying a family-shared property needs the same infrastructure, written agreements and formalities just as much as a business does. Before the parents or grandparents actually pass ownership or control to the next generation, it is critical to establish a clear understanding as to how decisions will be made, who will be in control, what consequences there will be if jointly developed rules aren’t followed, and how financial responsibilities will be handled.
The more successfully co-owned family properties have resulted from a family planning session which created some guidelines. If it’s possible for the family members to physically meet, meet via conference call or video conferencing, some of the meeting agenda topics should be:
Decision making—One owner, one vote? Do in-laws get a vote? Does majority rule?
Management meetings—How often and who attends?
Family oneness weekends—For siblings and spouses only, without kids, or “everyone in the pool?”
Usage—Who gets to come when? How is that determined? Drawing names? A lottery? Trading of dates allowed? Set aside certain weekends for all family weekends, like July Fourth?
Governance—Who is in charge? Does this responsibility rotate? Can only direct family members hold an office?
Budget—How to handle assessments, how to cover damages? From what family “pot” or individual trusts will the operating funds come? What happens if one family doesn’t have the same or enough resources to contribute their fair share? Do only those who use it pay a usage fee? Do only those who financially contribute to its upkeep get to use it?
Sell or keep?—What if some family members want to sell the property and use the proceeds to buy their own summer place? How is that determined? What is the purpose of having this family property?
Terminating— How does a family withdraw from ownership? How is the value determined and what will be the buy out provisions in the case of death, divorce, disability or disinterest?
Having basic rules to avoid distrust among family members is crucial to the on-going enjoyment of the vacation property. Written rules, ownership agreements, and codes of conduct are every bit as important to the family that vacations together as they are to a family that works together.
Although a shared family property can be a strong bonding agent for the family, it requires more management efforts and time with each succeeding generation. However, if done with proper planning, the benefits can far outweigh the added management burdens. Think of the advantage of having second and third cousins convene at the family retreat/camp once a year which promotes closer on-going relationships that could become diluted without this effort. Great conversations can be had, as well as wonderful family moments created by shared ownership in the family mountain cabin, beach home, or retreat Lake Lodge, spanning generations. Are you planning a haven or creating havoc?
CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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