It may sound ideal to keep a home of your grandparents for all family branches to gather, relax and enjoy, or share a beautiful summer home on the lake. But what happens when your cousin comes with her five kids and three large dogs for a month? Or the taxes and maintenance are being split equally but you barely use the property? Or what if some family members leave the property in disarray? Unfortunately, sometimes a good idea intended to bring the family closer together can create tension and conflict.
Consider these five tips to enjoy your property while also maintaining the peace:
• Get clear on the why: If everyone has different goals for the home and reasons to invest in it, the relationships could be better served by not buying or selling. If all parties agree, consider putting a formal plan in place that outlines the agreed-upon policies for how to enjoy the property in mutually agreeable ways.
• Plan for the unexpected: Sit down together and create guidelines to ensure fair use of the property and manage potential conflicts, include points such as:
Expenses and financial considerations: Determine how expenses and capital improvements are going to be handled.
Scheduling and usage: Who can use the home and when? How are holidays handled? Can friends and extended family use the home?
Standards of conduct: Cleaning expectations, quiet hours, dealing with damages and sharing property such as toys and bikes.
Decision-making: Who is involved in decision-making, resolving issues and dealing with conflicts? Who can assist with mediating issues that arise?
• Remove the handcuffs: Include in the policy a way for owners to opt out. Sometimes, life events, such as divorce or not being able to contribute financially, make it difficult to take advantage of the property. Forcing connectivity and ownership can lead to resentment and discord. Many families will agree to buy out the sibling’s ownership in installments so the property can stay in the family and other family owners are not faced with the urgency of coming up with immediate liquidity.
• Review and revise regularly: Having a policy is just the first step. We recommend reviewing at least every three years to make adjustments.
• Get tax help: Consider setting the property up as an LLC to minimize liability and make transfers of partial interests easy among parties invested in the property. You may also consider a qualified partner residence trust (QPRT) that allows you to transfer the property with little or no gift tax.
Families and friends have shared properties to gather, laugh and build memories. Having a plan and getting some help to stay accountable can make a world of difference in achieving this goal. Having patience helps too.
Jill Shipley is managing director of family dynamics and education at Abbot Downing, a Wells Fargo business.