Estate Planning for Your Vacation Home in Florida

Your vacation home probably feels like much more than a piece of property.  If you’ve owned your second home for long enough, it’s likely the site of many memories. 

You may not know how to accommodate it in your estate plan, but there’s a good chance you want it to stay within the family. Passing it on to the next generation is sensible, but leaving a vacation property as an inheritance is sometimes easier said than done.

Vacation homes are, after all, an investment—an investment that can pay in many different ways, but which may well require its own insurance policy, maintenance fees, and property tax payments. Without a proper plan, a lot can go wrong. Read more to learn how you could protect your second home, then contact Beacon Legacy Law to schedule a Vision Meeting with our office. 

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The Risk of Leaving a Second Home Inheritance Unprotected

You can only keep your vacation home safe for the next generation if you establish a solid estate plan to ensure that your heirs’ inheritance is hassle-free. In the absence of an effective estate plan, you could face risks including, but not limited to, the following: 

Intestacy 

If you pass away without a will or a trust, you will have died intestate.

Every state, including Florida, has its own rules for intestate succession. In general, the estate of a person who has died intestate will be divided among their closest living relatives, with priority given to any surviving spouse and any surviving children. This sometimes leads to multiple heirs having shares in the same property—a situation that can easily foster discontent and disagreement about a vacation home’s future. 

Creditor Claims

If a vacation home isn’t protected by an estate plan, it will most likely have to pass through probate before its title can be transferred to your preferred heir or heirs. During probate, a wide range of “interested parties” must be notified of proceedings. In Florida, interested parties include creditors—creditors who will have a chance to file claims against your estate. 

Even though creditors can’t typically lay claim to a family home (primary residence), they may be able to compel the sale of a vacation property. 

Disputes Among Heirs 

You may have a great relationship with your children and other heirs, but there’s little guarantee they’ll see eye-to-eye when the title to a vacation home is up for grabs. One child may feel more attached to the property, whereas another may well wish to sell it—a dispute that, if not properly accounted for in your estate plan, could escalate into a lawsuit. 

Out-of-State Probate

If you aren’t a Florida resident, your family will most likely have to initiate probate in multiple states. This may require appointing an executor who can regularly travel to Florida for court hearings and other legal formalities. 

How Our Florida Estate Planning Attorneys Can Help You Leave a Vacation Home Inheritance

You don’t have to put your faith—and your heirs’ rights to an inheritance—in the hands of a Florida probate court. Instead, you could protect your second home through any one or more estate planning strategies.

LLCs

A limited liability company, or LLC, is a legal entity that can own and manage different types of assets, including real properties. Since LLCs often require operating agreements, you and your heirs can structure a contract that contains provisions to preempt disputes and regulate how, if at all, the property should be rented when not in use by your family. 

Direct Transfers

You have a right to transfer your vacation property to one or more heirs in your will or during your own lifetime. However, transferring a property isn’t always ideal. Transfers can be taxed, and split-ownership arrangements could foment disagreement after your death. 

Revocable Trusts

Revocable trusts can be used to distribute different types of assets upon your death. 

After establishing a revocable living trust, you retain the right to use, access, and control trust assets. You may make changes to your trust’s terms at any time and can place conditions on how your beneficiaries can use your vacation home. 

Once you pass away, your vacation home can be transferred to your beneficiaries outside of probate. 

Irrevocable Trusts 

If you establish an irrevocable trust for your vacation home, you must transfer your property into the trust and appoint a trustee to manage it on behalf of your beneficiaries. 

Unlike a revocable living trust, you will not retain full control of the property during your lifetime, although you may still include provisions to ensure that you can access and use your vacation home as you see fit. 

The significant advantage of an irrevocable trust is any assets held by the trust will, with few exceptions, be exempted from your estate. This can provide some relief from the federal estate tax and act as an effective shield against creditor claims. 

Qualified Personal Residence Trusts

Qualified personal residence trusts, or QPRTs, allow parents and other homeowners to gift a vacation home at a reduced value while still retaining access to the property for a specified period of time. This estate planning tool works by transferring a residence into an irrevocable trust while the grantor maintains the right to live in or use the property for a set number of years. When the trust term expires, the property passes to the designated beneficiaries, typically children or other family members.

Do You Need to Speak to an Estate Planning Lawyer in Palm City or Stuart?

If you need help creating an estate plan to secure your future, contact us online by clicking the button below to schedule an appointment. For immediate assistance, call (772) 266-5108 now.

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