Vacation Properties and Estate Planning Options

 Posted on June 25, 2015 in Beneficiaries

Many families invest in vacation properties—a mountain cabin or ocean cottage—as places in which to escape and enjoy quality time together. Often, a family owns a vacation property for years—a home enjoyed while watching their children grow. Years later, the property becomes a place where the family's grown-children bring their own children.

Yet where does a vacation home fit in when it comes to estate planning, and what options do owners have to ensure a property is protected?

Cabin Trust

Property owners have the option to create a "cabin trust." A cabin trust is a revocable trust formed upon a property owner's death. An owner can choose to add a certain amount of money, along with the property, specifically designated for any costs incurred for the upkeep of the property. Additionally, the trust should have instructions regarding what should happen to the property once those funds are depleted, and when and if the property can or should be sold. A cabin trust can also stipulate who is allowed to use the property and when the property may be utilized. A beneficiary's right to use the property pending death can also be added as an additional stipulation.

Limited Liability Company

Owners also have the option of forming a limited liability company or LLC. With an LLC, an owner transfers shares of a property to beneficiaries. The LLC should have an operating agreement which clearly stipulates the property's ground rules and how major decisions regarding the property will be made.

Having a property in an LLC also protects beneficiaries from personal liability should an issue arise surrounding the property. For example, if there is a financial issue, a creditor can only make claims against the LLC and not to any of the beneficiaries directly.

Consult with an Experienced Estate Planning in Illinois Today

Cabin trusts and LLCs have both positive points and downsides. Therefore, it is important to consult with an experienced DuPage County estate planning attorney to find out what option will work best for your situation. Call 630-665-2500 today.