What if Your Kids Don't Want Your Vacation Home? by Scott Stolz, CFP, RICP (week 62)

 

We were lucky enough to inherit a lake house on the Lake of the Ozarks from my wife’s parents.  For those of you that watched the show “Ozarks” let me say for the record that the actual Lake of the Ozarks is nothing like the fictional Lake of the Ozarks in the show.  The show makes it look like a backwoods place with cabins and a few small boats.  In reality, it’s a happening party place where 40+ foot boats seem to be everywhere.  We spend most of the summer here for a change of pace and a break from the Florida heat.  The break from the heat part hasn’t worked out very well this year.  Today, it’s “only” expected to reach 97 degrees, which will break our five-day 100-degree streak.  In fact, I think we’ve experienced more 95+ degree days here than we would have had we stayed in Florida.

                                  Another Beautiful Sunset at the Lake

 

My wife and I have had conversations recently about what will happen with this lake house when we’re gone.  Will my kids want it?  If so, will they want it for the same purpose?  What if one of them wants to use it as a vacation home and the other wants to either rent it out or sell it?  And if they use it differently, will they be able to reach an agreement on how the maintenance costs and taxes be covered?  What if the person that uses it the most is the least able to afford these costs?

According to the National Association of Home Builders, in 2023 there were 5.7 million second homes in the country.  If you own one of those homes, you need to have a plan.  If you are a financial advisor, you need to help your clients have a plan.  Absent a plan, you are expecting your kids to peacefully agree on how your vacation home will be used or sold.  Sadly, there are far too many examples where the agreement is far from peaceful or worse yet, there is no agreement at all.

Step #1 is to sit down with your kids and ask them if they even want the house.  And if so, do they expect to use it as a vacation home, rent it out or a combination of each.  At this stage in their lives, I fully expect my kids to tell us that “it depends.”  Therefore, this needs to be an ongoing conversation.   Life happens.  Things change. 

Unless both of my kids say they definitely won’t use the house and have no desire to rent it, we will place the house in a separate trust.  We will then buy a second to die life insurance policy within the trust in order to provide funds for maintenance and taxes, thereby eliminating any potential conflicts about who pays these costs in the event one of my kids use it more than another.  This trust can also address how the property can and cannot be used as well as how it should be maintained and under what circumstances it can be sold.  I’m sure any such instructions will also need to change over time as it becomes clearer how my kids might use the house.

The bottom line here is that you are tempting fate if you think simply leaving a vacation house equally to each of your kids will not lead to conflict.  The more valuable the house, the more likely the conflict – especially if each of your kids are in different financial situations.

If you’re an advisor, I would encourage you to go to the Advanced Planning Educational Group (APEG) website (2026 Visitor Home Page | APEG - Advanced Planning Educational Group,) This site has a great course titled “Planning for the Family Vacation Home” as well as many other financial planning topics.  It was this course that got me really thinking about how we are going to manage our home.  I’m confident you will find the subscription fee for the content on this site well worth your money.


Comments

Post a Comment

Popular posts from this blog

How to Teach Your KIds to Appreciate Money by Scott Stolz (week 18)

Image
  Last week my daughter got married in D.C. to mark yet another milestone.   Now that both of my kids are married, it kind of feels like another of my jobs is now done.   Between my retirement 4 months ago and the wedding, that’s a lot of change in a short amount of time.     It was a great weekend all around.   Both the welcome reception the night before the wedding and wedding itself were spectacular.   Best of all there were no unexpected hiccups and very little drama.   And to answer your question, yes, I did cry.   But in my defense, I was totally set up.   They now do a first look for the father.   They made me stand outside the hotel with my eyes closed and then had Kim come stand beside me.   They made me wait a full minute before they let me turn around.   By that point, I had no chance to hold it together.   She looked so amazing and so grown up.   And yes, there might have been a tear or two when I w...
Read more

Reflecting on My First Year of Retirement by Scott Stolz, CFP, RICP (week 53)

Image
  Tomorrow will mark the one-year anniversary of my retirement.   It therefore seems natural for me to reflect on how I’m handling this next stage of life.   I’m going to apologize in advance that this blog is likely to get a bit philosophical.   Overall, I think I’ve handled the transition into retirement really well.   As I’ve mentioned in previous blogs, there is a lot to like about retirement.   Mostly it’s the new freedom and flexibility to do things I didn’t previously have time to do.   And a very close second is no longer having to do things I really didn’t want to do but had to do.   Things like back-to-back-to-back zoom calls and annual performance reviews.   But there has been a downside – at least for me.   In a way, I’ve gone through a period of mourning, because there is no doubt that I’ve lost a part of my identity.   Prior to joining Raymond James to lead its insurance and annuity division, I worked for 3 dif...
Read more

Why I'm Replacing My Variable Annuity with an FIA by Scott Stolz (week 19)

Image
  In 2009, at the age of 49, I bought a Voya (previously ING) Architect Variable Annuity just before Voya undertook a series of product changes to lower the amount of guaranteed income provided by the lifetime living benefit feature.   The policy was bought in my custodial IRA account.   My plan was simple.   Start the income at the age of 59 ½ (the earliest age I could begin the lifetime income payments) in order to liquidate the annuity as quickly as possible.   Once the account value reached $0, I would continue to get my lifetime monthly income out of Voya’s general account rather than my own money.   At this point, I need to provide a little educational content on annuity living benefits for those reading this that are not familiar with this concept.   Most annuities today come with an optional living benefit feature that can be tacked on to the policy for an additional charge – usually 1-1.5% per year.   This feature allows the policyhol...
Read more