In Wisconsin, I have many clients who own a family vacation home “Up North”. In fact, within my own family, we have a lovely cabin in Vilas County where we spend many relaxing holiday weekends together. Therefore, I personally understand the importance of planning to ensure a treasured family cabin can remain within the family following the death of a parent or parents.
Within a revocable living trust, a popular and very effective option is to create a separate “Cabin Trust” that will spring into existence upon the death of the trustor(s) (note that the “trustor” is the person who creates the trust). The trust can direct that the family vacation home will then be distributed to this Cabin Trust along with a specified cash amount to provide for the upkeep and maintenance of the property, which should include, but not be limited to, real estate taxes, insurance, improvements, and general maintenance of the property, for a certain period of time. The trust should also designate the beneficiaries (usually the trustor’s children) who may share in the use and enjoyment of the property. If a child dies, then his or her right to such use and enjoyment can pass to that child’s descendants.
In addition, the trust should name a trustee of the Cabin Trust who will be responsible for the general management of the property and trust funds. When the trust funds run out, the trust should provide that the adult beneficiaries of the trust will then become responsible for paying their fair share of the expenses. If a beneficiary fails to pay his or her share, then such beneficiary has lost his or her right to the use and enjoyment of the vacation home.
Finally, the trust should designate the circumstances under which the vacation home can be sold. Often, parents require either a majority or a unanimous consent among those children who have met their financial obligations before the property can be sold. Parents also often provide within the Cabin Trust that their children will have the first option to purchase the vacation home from the trust at a discounted price.
Overall, a well-crafted Cabin Trust can be a wonderful tool to keep the vacation home in the family and to eliminate potential future family disputes!
Source: New feed