By Elizabeth A. Caruso, Esq.
With summer swiftly upon us, I wanted to take this month to highlight benefit of estate planning that many people may not think about when crafting their overall plan – the management and distribution of second homes. Some are lucky enough to have invested in or inherited second homes. These second homes often serve as summer vacation destinations for families, but what happens when the original purchaser passes away?
Read on to find out!
Just like a primary residence, when the owner of a second home passes away, the property is subject to probate unless the title to that real estate is not held in the person’s name individually. If there are joint owners, it will pass to those joint owners who are still living, or if it’s in a trust, it will pass pursuant to the trust. Avoiding probate is everyone’s goal when utilizing a trust, but there are other things that can be accomplished with regard to second homes, like continuation of finances, clear rules on the use of the property, and clear distribution of the real estate to the next generation.
A trust can help keep a second home financially viable throughout the original owner’s life and then as it is passed on to the next generation. As anyone who owns real estate knows, these properties can get expensive! Setting aside that there may be a mortgage, there are real estate taxes, utilities, homeowners’ insurance, and the cost of general upkeep and maintenance. If a trust is funded not only with real estate, but with cash, then there is a pool of money to pay for the expenses of the real estate without the beneficiaries having to come up with the funds on their own. This can eliminate strife between beneficiaries who may be able to afford the expenses and their counterparts who cannot.
A trust can also help create the rules for the use of a second home. If there are multiple people that inherit the real estate, a trust can outline the usage of the real estate. How much time does each person get at the property? Are you able to get extra time or switch weeks? Will the property be rented out? What happens to the rental money? These are all questions that can be answered with a properly drafted trust that makes everything clear for all parties involved.
An elder law attorney can help you to create a trust that is set up with the necessary language to make the ownership and usage of a second home clear and fair for all parties involved.
About the Author: Elizabeth A. Caruso, Esq. is an attorney at Legacy Legal Planning, LLC, in Norwell. She has been practicing estate planning, probate, and elder law on the South Shore for more than a decade. If this article has sparked questions for you, please feel free to reach out via phone 781-971-5900 or email elizabeth@legacylegalplanning.com to schedule a time to discuss your unique situation.
