There are a variety of options available to provide for the orderly transfer of the family Vacation home from one generation to another, some of which may be successful in protecting the property from being lost to the TAX MAN upon the death of the senior generation.
1. Sale to the next generation, although there may be some Capital Gains Tax if the property has been held for some time.
2. A simple bequest can keep the property in the family but there may not be any tax savings .
3. A Qualified Personal Residence Trust may be useful. The Grantor retains the right to continue to use and control the use of the property for a defined period and unless he dies during the period, the value will not be in his estate.
4. A family Limited Liability company (LLC) will limit liability of the owners if someone is injured on the property and affords the senior generation a vehicle for transferring ownership over a period of time to the next generation.
Passing property to the next generation often results in dividing the pie, so to speak, into ever small pieces, often with differing percentages of ownership. Whatever approach is used, it is important to to provide a means for individual owners of ever smaller portions to sell their interests at fair rates to other members, using, for instance, at least two appraisals to reach a fair value of the share at issue.