Cherished Family Properties: Enjoying Today While Planning for the Next Generation

When Thoughtfully Planned, a Second Home Can Remain a Place that Brings Family Together.

For many families, second homes are places to gather and create enduring memories. Whether a coastal property, lakeside cottage, or mountain retreat, these special settings allow us to slow down in our busy lives and connect with loved ones. They can provide an opportunity to detach from everyday stresses and pursue activities we enjoy. Given these benefits, it’s no wonder that a second home is often a meaningful part of family life. At the same time, these shared spaces can introduce complexities that need to be managed, particularly when planning for generational transition.

Understanding the Responsibilities of Second Home Ownership

Like any property, management of a second home requires time and money. There are ongoing capital improvements and maintenance necessities, which can require steady expenditures. Other payments may include property taxes, insurance, and utilities. Continued oversight and safeguards may be essential during the off-season months for security or to protect against weather events. Additionally, shared use by multiple family members may introduce complicated dynamics for scheduling and funding.

Eventually, second-home owners will consider future plans for the property involving family, lifestyle choices, and finances. Discussions are often prompted by life changes, such as retirement or the next generation achieving adult milestones like marriage or starting families. The first step in developing a plan for a second home is open communication – the earlier the better.

Considerations When Deciding the Future of a Second Home

There are a variety of factors to assess regarding the future of a second home. In a family with multiple children, their individual preferences and life circumstances should be discussed and carefully understood. Key questions for the next generation may include:

• Do certain children value the property more than others?
• Do they want to utilize the property in the future?
• Are they willing to take on the responsibility of oversight, maintenance, and costs?
• Do they have different expectations about usage, guests, or rentals?
• Do any prefer proceeds from a sale over retaining the property?

Some children may live far away, while others may live nearby, which makes access easier. They may have unequal financial resources, which can affect how much each can contribute. Or it is possible that certain children want different second homes tailored to their own expanding families. Understanding these factors can help set expectations and responsibilities for the property.

Strategies to Enable a Generational Transfer

After thorough discussion, if a family wants to keep a second home for the next generation, there are a variety of ways to transfer it. For example, a home can be passed down through a will that states who will own the property and who will pay for upkeep costs. Alternatively, a trust can be created to set provisions for the property’s use, sale, or division among future generations. In addition, a trust may help avoid probate or offer certain tax advantages. Another approach is to establish a partnership or LLC, in which children have membership interests and established rules, although this may include additional administrative requirements.

To cover the property’s maintenance and other future costs, it may be possible to set up a fund within a trust or separately. This can help alleviate the burden on future generations who pay for the home’s needs.

Engaging financial professionals can help facilitate future planning of second homes. At Welch & Forbes, we often work with multigenerational families. Knowing our clients well allows us to promote open conversations about family preferences, expectations, and obligations. We assist families in evaluating transfer strategies and can collaborate with external specialists, such as estate attorneys, as needed. Lastly, we can act as trustees to help fulfill the original owners’ intentions over time. Proactive discussion, planning, and trustworthy execution can help preserve treasured second homes for families now and for future generations.

If you would like to learn how Welch & Forbes may be able to assist you, please contact our Client Development team online or call 617-557-9800.

Disclosure: The information contained herein reflects the opinions of Welch & Forbes, LLC based on information believed to be reliable as of the date of publication. It is provided for educational purposes only and does not constitute investment, financial, tax, or legal advice. Consult your tax advisor or legal counsel for advice and information concerning your particular situation. This communication does not constitute a recommendation or solicitation to purchase or sell any securities or investment services. Welch & Forbes, LLC is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.