Is Your Vacation Home Ready for the Next Generation? Estate Planning for Second Homes

For many families, a vacation home is far more than just a piece of property. It’s a place where memories are made—priceless moments that span generations. Maybe it’s the lake house where your kids learned to swim or the beach getaway where everyone gathered for holidays and traditions. I’ve seen firsthand that these homes aren’t just assets—they’re emotional touchstones that carry sentimental value well beyond their market price.

And that’s exactly why it’s important to ask: Is your vacation home ready for the next generation?

Many families love the idea of passing their vacation homes down. It’s a great feeling knowing your children and grandchildren can enjoy the space as much as you have, continuing the traditions you started. But without a plan, things can go sideways fast—unexpected costs, disagreements, or worse, the sale of the property you worked hard to hold onto. If your goal is to preserve the property and the memories, it’s worth taking the time to explore the estate planning strategies that can help make that happen.

Why This Gets Complicated Fast

Splitting an investment account or a bank account among heirs is pretty straightforward. But when it comes to real property, especially something as emotionally charged as a vacation home, things can get messy quickly. Here are some of the common challenges I see:

Different Priorities: Not everyone will feel the same way about the home. One child might be emotionally tied to it, while another sees it as a burden, and a third just wants their share of the inheritance in cash. Even in close families, these perspectives can vary widely.

Ongoing Costs: There are real costs associated with keeping a vacation home running—utilities, maintenance, taxes, and insurance, to name a few. These expenses can add up fast. Families often find themselves asking: “Do we have the time and money to keep this going?”

Liquidity Issues: What happens when one family member wants to sell their share? Will the others be willing—or able—to buy them out? What’s a fair price? Without a plan, these conversations can quickly become difficult or even lead to legal disputes.

Usage Conflicts: Everyone wants the house for the Fourth of July or Labor Day weekend. If there’s no plan, scheduling conflicts and perceived unfairness can lead to tension.

Taxes and Probate: Depending on the size of your estate and where the home is located, there could be estate or capital gains taxes to consider. And if the home is in a different state from your primary residence, that can introduce probate complications.

Where to Start

Before you call a lawyer or create a trust, the first step is to have a family meeting. Sit down and talk honestly. The goal here isn’t to dictate your wishes—it’s to understand what your loved ones want and are capable of handling.

Here are a few helpful questions to ask:

• Do you want to keep the vacation home in the family?
• Are you financially able to share in the costs and upkeep?
• How would you envision using the home—holidays, seasons, special events?
• Would you be willing to share responsibilities and decision-making?

Some of the answers might surprise you—and that’s OK. It’s far better to find out now than to leave behind confusion or resentment.

Planning Tools to Consider

Once you’ve had those conversations, you’ll have a better sense of what’s realistic. From there, it’s time to look at planning options. There’s no one-size-fits-all answer, but here are the strategies I most often walk through with clients:

Leave It in Your Will (with Caution): This is the simplest approach—but also the riskiest. If you leave the home to multiple heirs in your will, they become “tenants in common,” each owning an undivided interest. That means any one of them could force a sale or get entangled in legal or creditor issues. Plus, it usually involves probate, which can be time-consuming and expensive—especially if the property is out of state.

Create a Trust: A trust gives you more control and protection than a will. A trust allows you to outline clear rules for how the home should be used, maintained, and passed on.

• Revocable Living Trust: This lets you retain control while you’re alive, and it can be updated if family dynamics change. It avoids probate and allows you to specify how the property should be managed.
• Irrevocable Trust: This option transfers the property out of your estate for potential tax benefits, but you give up control. You can still set terms for how the home is used for a certain period. These trusts require careful planning and professional guidance.

Advantages of Trusts: They avoid probate, offer privacy, and can include a dedicated fund for future maintenance. This helps your heirs manage the home without immediate financial strain.

Form a Family LLC: An LLC effectively turns your vacation home into a business entity. Ownership is divided into shares, and the operating agreement serves as the “rulebook.”

Why Consider an LLC:

• Liability Protection: The LLC shields family members from lawsuits related to the property.
• Clear Rules: You can lay out how costs are shared, how time is scheduled, and how disputes are resolved.
• Ease of Transfer: Ownership shares are easier to transfer than real estate deeds, simplifying future transitions.

Things to Watch Out for with an LLC: Setting up an LLC comes with some upfront costs and ongoing administrative responsibilities. Financing can also be a bit trickier. But if multiple heirs are involved, the structure and flexibility are often worth it.

The Nitty-Gritty Details Matter

No matter which structure you choose, don’t skip the practical stuff. This is where things tend to fall apart—or come together beautifully.

Make sure your plan addresses:

• Ongoing Costs: How will taxes, insurance, and maintenance be paid? Will everyone contribute equally? Will there be a reserve fund?
• Scheduling: Who gets the house for holidays or peak seasons? Is it a rotation system, a lottery, or something else?
• Big Decisions: How will renovations or major expenses be handled? Majority vote? Unanimous approval?
• Exit Strategy: If someone wants out, can the others buy them out? How will that price be determined?
• Fairness Across Your Estate: If some heirs don’t want the house, can you balance things by leaving them other assets?

These aren’t always easy topics—but they’re absolutely necessary. It’s about setting your family up for success, not just with the home, but with each other.

Here’s My Two Cents: Don’t Wait

If there’s one thing I’ve learned from working with families on this, it’s this: Don’t kick the can down the road. If your goal is to keep the vacation home in the family, make a plan—now.

Without clear direction, you leave your loved ones with confusion, stress, and potential conflict. But with the right plan in place, you give them clarity, stability, and a place they can continue to enjoy together for generations.

Because in the end, this isn’t just about a house. It’s about the memories made there—and the ones still to come. Let’s make sure that legacy sticks around.

The opinion of the author is subject to change without notice and must be considered in conjunction with relevant regulation, as well as subsequent changes in the marketplace. Any information from outside resources has been deemed to be reliable but has not necessarily been verified. Each individual has unique circumstances to which this information may or may not be relevant. Under no circumstances will this information constitute an offer to buy or sell and it does not indicate strategy suitability for any particular investor.