property went to two cousins who have The cherished quality of the heirloom since let the place go to ruin and have shut property may start with a de facto The Vacation Home – the door to my siblings and me. declaration that the home is “our” family treasure. Grandma and Grandpa, Mom Will it be a Blessing or My wife and I acquired a home on Lake and Dad, Uncle or Aunt have said, in so Winnipesaukee in New Hampshire. There many words, “this will be yours someday” a Curse for the Next our getaway life featured leisurely four- to their likely heirs. Children grow up Generation? course breakfasts, hours of conversation, with the expectation that they will be able boating, swimming, waterskiing and to enjoy the home into their adulthood and sledding, and runs into Wolfeboro for ice one day they bring their spouses and then © 2010 Timothy B. Borchers, J.D. cream. Together we enjoyed satisfying their children, creating their own special building projects and many teachable memories. Published in Massachusetts moments with our kids. We fondly recall Lawyers Weekly, August, 2010. “vacation church,” where our youngsters The children may make up their own would sing songs or recite verses from a mind that the home should be theirs, and perch on the stairway overlooking the that they would like to get at least another living room. These are the characteristics few decades out of it. The place that The rewards and challenges in passing of a way of life that we enjoy, like many Mom and Dad acquired on a whim has down that cherished residence to your families, and that we wish to pass along, grown on the children, becoming an heirs. as among our highest family values and extension of the family, a logical destiny achievements. for them to keep, and thus stay close and By Attorney Timothy B. Borchers involved in each other‟s lives. Worth holding on to. The vacation home... It evokes a picture Heirloom homes are found anywhere and On the other hand if the kids and of family and friends enjoying time in any family, accounting for 5 to 10% of grandkids stop coming and enjoying together at the cottage or cabin, lodge or the U.S. housing stock. Each region has themselves and start thinking they‟d ranch, villa or manor, somewhere away its magnets: Cape Cod, the Florida Keys, rather have the money than the home, the from it all - lakeside, seaside, in the Flagstaff, Lake Tahoe, and the Upper property is probably not an heirloom. country or on the slopes - a scene repeated Peninsula to name a few, where second Similarly if the senior generation says, year after year, a place and a memory that homes and heirlooms can be 25 to 50% of “Sell it when we die,” or “We have to sell are truly a treasure for generations to the tax base. Wealthy families have this to pay for our nursing home,” then the enjoy. The home may be a Hyannisport always had second homes, although they property probably lacks that je ne sais estate or it may be Shrek‟s “Swamp,” but can lose them just as easily as the middle quoi to make it to the kids or grandkids. when everyone from Grandpa down to the class, for whom the vacation home is a youngest grandkid thinks, “This place is badge of “making it.” Good Intentions. special… I hope we enjoy this spot Despite parents‟ good intentions, there are forever,” it‟s not just a vacation home, it‟s Inherited, purchased, built with your own serious obstacles facing the children in an heirloom property. hands, co-owned with your siblings, inheriting that home. Management and cousins or even friends, the heirloom finances are major problems for even the Living memories. property is unique in the quality of life it most organized children. Worse still are Where do you make your getaway extends to owners and their families. differences in opinion that formerly went memories of fun in the sun, rainy days While at your special spot, the living is unspoken. There are those in the family spent in conversation, board games and easy. Quality time together, across who favor selling vs. those who favor reading, cold evenings with hot chocolate generations, with nature close at hand, is keeping, those who would rent vs. those by the fire, dining out and summer the essence of the heirloom property that who want exclusivity, those who are theater? My own past recalls many makes it worth holding on to, no matter willing or able to put out the money or the summers of good times with my mother, where exactly it is. Location is more apt effort to keep up the place, and those who my siblings and cousins, at her family‟s to drive the heirloom quality of many aren‟t, those who care vs. those who are home in upstate New York. It was a primary residences, while apathetic. In my experience disagreements simple cottage we called “camp” with a multigenerational use is more likely to among heirs over the property quickly small sandy beach, outdoor well water, a characterize the heirloom second home. turn what was a breezy slice of heaven - silly old rowboat, walls of books, and into a hot piece of hell. meals on the porch overlooking the field leading to the water. That heirloom

This unfortunate family breakdown is scheduling next summer‟s vacation. meets all their needs (very hard to do), or preventable. If the senior generation does Someone is put nominally in charge but to allow the inevitable sale of the home. heirloom property planning, the chances has no real authority. of successful inheritance of the cherished There is no shame in failing to pass down home are increased exponentially. Even Not long after the keys are handed over it an heirloom property, but if it comes after heirs‟ differences of opinion about the becomes evident that co-ownership is years of frustration while the property is future of the property can be fraught with problems. Shared use, allowed to run down, I do feel it is a accommodated if either the parents or the making payments, disagreements over waste. These devastating periods in children inheriting adopt the right preservation versus upgrades, divorces family relationships could likely have organizational and financial design. and other claims against member„s been prevented with simple planning. If However, left to their own devices, the interests, talks of selling, and eventually an heirloom plan produces a second, third heirs of the vacation home rarely have the more inheritance issues complicate or fourth generation of owners, terrific! combination of wisdom, organization, relationships tremendously. The senior Alternatively, if it provides for a smooth finances and luck to overcome co- generation didn‟t leave a protective, sale and allows heirs to move on with ownership obstacles on their own. organizational structure and funding, and their lives, then that may be the best the junior generation isn‟t adept at coming result. Emotional attachment is Passing the keys. up with their own agreement and financial important to acknowledge in this process, A lot of money is spent on acquiring and plan nor do they seek help to do so until but ultimately structure and reason must keeping the treasured home. In addition there is a major problem. prevail for the sake of family harmony not to mortgages and taxes, improvements to mention stewardship of a valuable and upkeep, some families form Initially gung-ho, but later disorganized, asset. companies to hold title, guarding the under-funded and at odds with one ownership against outside claimants. another, some heirs are trying to make it Jump starting the inheritance. Others use trusts to gift ownership or to work, others have lost interest, and others The senior generation of owners often protect the home from having to be sold to are ready to sell at the drop of a hat, or are wish to assist in the education of the next pay for the senior generation‟s nursing forced to do so due to claims against their generation of responsible new owners by home care. interest. transferring ownership and imparting the various stewardship requirements, With all the effort that goes into Organize, finance, get along, or sell. observing how the younger generation maintaining and protecting the home, Having witnessed many families suffer handles the obligation. This is a attempts to pass down the property harm to their relationships over the woes commendable approach because it brings successfully mostly stop short, well short, of co-ownership has lead me to advise out the next leaders, the workers, the ones of anything qualifying as a “plan.” that planning to protect the home now and who only love to party and, in the final Simply leaving the home to the heirs to let for the next generation of owners is just as analysis, the parties to whom the property them figure out how to manage it is important to consider ahead of time as really matters. woefully insufficient. replacing the roof before it leaks, and carrying insurance against fire and Many families begin sharing the While Mom and Dad or Grandma and liability. The trick is to get couples, knowledge and responsibilities for the Grandpa are in charge and paying for the families and partners to take some basic, home well before they retire or die, but heirloom home, there is a blissful sensible steps for ownership today that few discuss the difficult issues of how complacency around ownership issues. will grease the skids of future co- will the heirs all manage it, get along and Parents pass away, and perhaps the next ownership. be able to keep the property for many generation is off to a good start: children more years, as hoped. A vacation home are pitching in, schedules are created and My first choice is to have the parents (a) estate planner can facilitate this sacrifice is made to pay the taxes, transfer the home to a trust or limited discussion. insurance and - dread to think of it - the liability company that “lays down the mortgage. law” regarding co-ownership and (b) Co-owners need protective, provide a substantial kitty, preferably organizational structures. It had not occurred to the family ahead of funded by life insurance proceeds. If the Effective co-ownership requires an time to plan this transition. That doesn‟t current owners are not going to put this organization document and responsible stop the children from deciding to keep organization in place, my second choice is leadership. Commonly two tracks are the home. What else would they do? It‟s that clients direct that the property is to be possible: one with strong central the spot they were supposed to have. sold unless the heirs come to their own leadership, one with a more democratic They feel entitled, they want to hold on to written agreement within three years of flavor. I place the odds on the former the home, and by default they do so. inheriting, heirloom or not. Sometimes approach, but some families just can‟t Maybe there‟s one dissenter, but he or she the prospect of losing the house is enough bring themselves to be so business-like is cajoled into going along, and the to shock the members into coming and prefer a committee of the whole or siblings or cousins throw in together on together and being realistic - to either rotating responsibility. the venture with no plan except come to an ownership agreement that

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As a family organization, it should be run position the succeeding generation to keep Keeping it together. with family goals in mind, not merely and share, buyout, or liquidate in a The second home hangs together initially business goals. Family objectives should manner that preserves the values by the presence, finances and fiat of the be thought about at each generation of embodied in the property. But, while the founders. Second generations tend to owners, starting with the founder‟s joy in planner can lead his clients to the vacation keep the home when there are strong providing the sanctuary or escape from home plan, he or she cannot make them family ties, as long as financial and legal the rest of the rat race, having a place sign it. Direction from the current stresses do not tear the heirloom hearth where everyone is accepted, and keeping generation of owners is the logical key to asunder. in mind each family member‟s unique success, yet it is in short supply for two contributions - some financial, some reasons. Families that inherit low maintenance and handyman, some leadership, some - well - low cost dwellings keep the enterprise life of the party may be the most we can The first reason I believe current owners together the longest, though even these expect. At the same time, compassionate do not set up a succession plan for the families should adopt heirloom ownership planning acknowledges that not everyone home is naiveté about the issues of family plans. Here, I utilize a customized trust or will have the bank account or handyman co-ownership. Moms and Dads often say agreement of owners setting down basic skills to be useful. Dispensation can be to me, “my kids are smart, they„ll figure it rules for deciding on improvements, use, allowed to leave no one out, allowing out.” What “it” is, exactly, that they are charges, and future inheritance. years more of enjoyment for those whose going to figure out is uncertain. No child only contributions may be that they are knows everything involved with running Families with expensive or high the quiet listeners, the babysitters, the life the home. Maybe Johnny is expected to maintenance homes will thrive together or the soul of the party. A compassionate take care of the house and Janey to run the with a realistic plan for financial support organization within a caring family will schedule and the budget, but nothing is and management of that home. These adapt to the skills, qualities, contributions actually planned, and Johnny and Janey families are better served with a family and needs of the various members. have other ideas. limited liability company or an advanced trust instrument. The organization should be financed in a I see the original owners as not being realistic manner, promoting strong realistic about their kids‟ abilities in one The absence of a funded and protective financial commitment from the children or more areas: organization, cooperation organizational structure is almost always a but allowing for lean years when neither and financial discipline. Parents mistake death knell to the heirloom house the incomes of the children nor the rental their kids‟ relative success in life for a remaining in the family. Subsequent market can support the home. It is best natural ability to get along in co-managing generations are most likely to succeed in run with funding provided by life the family home, just like some parents keeping the heirloom home when the insurance on members of the senior think their kids will have no trouble current owners have the vision to create a generation, usage fees, dues and allowing slipping into their shoes and running a sensible, compassionate and business-like for rental when times are tough. family business, which is also proven to organization that is reasonably well be unrealistic. To exacerbate the problem, funded and suitable to ward off the The children and grandchildren will be unlike the family business, there isn‟t any challenges of co-ownership major glad their forebears had the foresight to money coming in or not enough money to disagreements, divorces, disability, claims impose or to urge structure and funding, make ends meet. and the coming of old age. provide buyout mechanisms, dispute resolution, and if necessary, a sale of the The second reason I see that parents don‟t property. When heirs or partners are not give guidance on inheriting the home is Attorney Timothy Borchers is an estate getting along and financial and legal that there is a feeling of resignation and protection and planning lawyer admitted stresses arise, in my experience it is too lack of information on the options that in Massachusetts and New Hampshire, late to create order out of chaos. The may be available to them. Most current who has been protecting clients, their children are unable to agree and they lack owners feel, “We‟ll just leave the kids the homes, and their families for over 25 a manager with legal authority to instill home… What else would we do?” years. For more information on the order and financial sense. topics contained in this article like the Actually, a sensible plan is very doable. Heirloom Property Family Worksheet or Direction of the owners and the role of You can set up an organization, you can to follow his blog, go to the planner. provide for leadership, you can plan for www.thewillcoach.com, contact him at As an estate planner with a passion for the financing, you can protect from outside Estate Protection and Planning, Borchers vacation home, my role is to identify the claims. In short you can guide the Law, P.C., Tel. 508.803.1900, or heirloom and to help get it to the next succession. [email protected] generation successfully. A good plan will

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