With its mild climate and warm winter sun, Arizona is a mecca for snowbirds who want to get away from the freezing temperatures, snow, cold rain and storms during the winter months. Many of these people end up purchasing a second or vacation home right here in the Valley of the Sun. As for Phoenix residents who live here year around, well, they want to get away from the blistering summer heat. Again, many of them purchase vacation homes in cooler areas of the state or in other states.
The question is how these home owners handle their vacation homes in their estate plan?
Here are some things to consider…
• Does the property need to remain in the family? Is it a legacy for generations to come?
• If your children don't get along now, and you leave the property to them jointly, do you think they'll get along any better co-owning property. The answer is probably no.
• Will your children view the second home as a burden rather than a gift? Will they be able to pay taxes? Insurance? Handle the maintenance and upkeep costs? Pay the mortgage?
• Would it be better to leave the property to one or two children, while recompensing the others with additional money?
• Would it be better to sell the property and invest the money for your loved ones?
• If something happens to you before you complete an estate plan, do your children know your wishes regarding the property?
A great use of a trust
Even more important, a trust can be used to create a fund that will pay for taxes, insurance, mortgage, upkeep and maintenance. It is important to take into account unusual expenses and future cost of living when creating a fund like this, so a professional estate planning attorney with years of experience can be very helpful. The fund should also include a fee for the trustee who is managing the property. A trust fund can relieve your heirs of the financial responsibility, leaving them free to just enjoy the vacation home.
Whether or not the property passes to your heirs, there should be guidelines in place for the sale of the property. Let's assume two children have inherited the property. What happens if the economy tanks, they both lose their jobs, and they need to sell the property to stay afloat? A good estate plan will take into account the unexpected and allow for the sale of the property with fair division among the heirs.
A second or vacation home can either be a joy or a burden to a family, so it is important that you plan now to make it as easy as possible for your heirs.