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Will the Vacation Home Keep the Family Together or Tear it Apart?

By Harry S. Margolis


Ahh, the vacation house.

The locus of so many family memories. The place where everyone can get away from their busy lives, relax and spend time with other family members.


The focus of family disputes over maintenance, finances, and use.

How can you assure the former and avoid the latter?

Medway Attorney Timothy Borchers and financial planner Chris Cahill (also a lawyer by training) provide some answers on their website where they have a downloadable ebook on the same topic. They also spoke about possible solutions on the AskHarry podcast series.


While solutions may include a trust or limited liability partnership or corporation, Tim and Chris say that any solution must consider six issues, which they have organized into the acronym AUGUST:

Agreement on ownership. Who are the owners? In what proportions?

Understanding the purpose of the property for the family. Is it an asset to be shared equally? If that’s not possible, should it be sold or some members of the family bought out? Or should it be available for everyone’s use, even if some members of the family use the property a lot and others not at all?

Governance. Who makes decisions about the property? How are those people chosen? Can they be removed and replaced? What happens if they resign or become incapacitated?

Use. Will the property be rented out to cover expenses? What happens when there’s more demand to use the property than room for everyone to stay? Does every nuclear family get a week or two? How are they scheduled?

Stewardship. Who’s responsible for maintaining the physical structure or dealing with the neighbors or work-people? Who opens up the property in the spring or drains the pipes in the fall?

Transferring ownership. If the property is owned by the children after the parents pass on, what happens when a child dies? Does her share pass to her children? Do they have the same governance rights as their parent? Does the property continue as a shared asset for the third generation, or is it sold at the death of the last surviving child of the original owners, since at that point there may be too many people with an interest to effectively maintain and manage it?

Once these issues are fully discussed, a structure can be put in place to achieve the agreed upon goals. That structure can be created by the parents as part of their estate plan or by the next generation when they inherit the property. When there may be disagreements, it’s usually better if the parents put the structure in place. Then all the children have to accept it.

For instance, the child living in California may prefer that the Cape house be sold and he receives his share, but if the house is held by a trust created by his parents and can’t be sold, then he’s more likely to accept the situation without a fight. (On the other hand, it’s just as likely the California son will really value his family’s two weeks back east every summer, while the local daughter prefers to go to her lake house in New Hampshire and resents that she’s the one who has to deal with the leaky pipes on the Cape.)

Financing the Solution

While agreed upon goals and governance are vitally important, one of the biggest questions is who’s gong to pay for it. This question certainly will influence many of the issues to be discussed under the AUGUST rubric, but perhaps needs its own initial. (The F in FALL, to make sure things don’t fall apart?)

Some vacation houses can be self-supporting if rented out, but doing so cuts into the family’s use. Some family members can afford to contribute to the property’s upkeep or may feel comfortable contributing based on use. But a lot of these issues can be avoided if the parents leave funds to be used for maintenance—in effect, an endowment. They might simply leave a certain amount of money in trust for the house or even buy life insurance to fund the house. If the insurance is paid out only upon the death of the second spouse to die (so-called “second-to-die” insurance) it can be significantly less expensive than insurance payable on the death of a single individual.

To learn more about how you can protect your vacation house for your family’s use with as little stress and tension as possible, read about options on Tim and Chris’s website and download their ebook.


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7 Questions to Ask Regarding Your Vacation Home

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