Passing Down a Family Vacation Home: A Case Study

Through the eyes of the Smith family, watch how these decisions can be navigated thoughtfully to balance legacy, fairness and flexibility.

A Family Conversation That Sparked a Plan

Over the holidays, the Smith family took a trip to their Florida beach home – a property Mr. and Mrs. Smith have owned for decades. As the family began to catch up and enjoy one another’s company, a discussion about who would ultimately be responsible for the home led Mr. and Mrs. Smith to ask their children how they felt about owning it someday.

While the Smiths have three adult children, only two had interest in taking on ownership of the home. The third, living all the way in California, knew she would rarely use the property – and questioned whether ownership made sense for her.

Like many parents, Mr. and Mrs. Smith wanted to be fair and help prevent conflicts between their children in the future – but they also wanted to keep their options open. At the same time, they knew it would be risky to rely on a casual family understanding. That realization led them to their estate attorney – and ultimately to a broader estate planning discussion.

Structuring Ownership: Trusts and LLCs

Following that conversation, the Smiths met with their attorney, Financial Advisor and Trust Officer as part of a larger planning discussion. There, they learned about two ownership structures families use for holding multi generational vacation homes: Trusts and Limited Liability Companies (LLCs). Each can play a role, but families’ unique planning goals determine which structure – or combination – will work best.

Using a Trust: Long-Term Planning and Oversight

Trusts offer a clear, structured approach for managing a family vacation home and passing it to future generations – while allowing the parents to continue using the property during their lifetime. For the Smith family, a trust-based approach offered a few advantages:

THE NEUTRAL OVERSIGHT OF A CORPORATE TRUSTEE

In a trust, there are three main roles: the grantor (the creator of the trust), the trustee (the manager of the trust) and the beneficiary (the person that benefits from the trust). When the trustee role is assigned to a corporate trustee, rather than an individual, it can act as a neutral third party – often described as “the grownup in the room.”

A corporate trustee can handle day-to-day responsibilities like paying expenses, coordinating maintenance and enforcing the terms of the trust without emotional bias. For the Smiths, this would mean the burden of managing the home wouldn’t fall unevenly onto one child – or cause tension as responsibilities shift across generations.

BUILT-IN FLEXIBILITY FOR THE FUTURE

When drafted thoughtfully, trust documents can address a wide range of “what if” scenarios, including:

• The death of a beneficiary
• A beneficiary who wants to sell their interest
• A beneficiary who decides they no longer want any involvement
• Rules around usage, scheduling and cost sharing
• Conditions under which the property may eventually be sold

This flexibility allows parents to anticipate – not react to – future family dynamics. In the Smiths’ case, it would create a way to acknowledge upfront that not all siblings had the same level of interest in using the home, without forcing an all-or-nothing decision. For example, the daughter who has no interest in using the property could receive more of the Smiths’ other assets so that she is not financially punished for her lack of interest in the beach house.

ASSET PROTECTION AND MULTIGENERATIONAL PLANNING

In some cases, trusts can help protect family vacation homes from personal financial issues like lawsuits, divorce or creditor claims. Along with that, trusts allow the home to be managed under a single, long-term plan – rather than forcing new decisions every time ownership passes from one generation to the next.

For families like the Smiths, this continuity would make it easier to think about the home as a shared legacy – while still giving clear exit points if future generations no longer want to keep it.

Using an LLC: Hands-On Ownership

An LLC is another way families choose to own and pass down a shared vacation home, particularly when they want a more hands-on, business-like structure for managing day-to-day decisions. This structure presents a different set of benefits:

FLEXIBILITY IN WHO MANAGES THE PROPERTY

With an LLC, families can name a manager to handle day-today decisions and change that role over time with relatively little formality. The operating agreement can also spell out how decisions are made, how the property is used and what happens if a family member wants to exit – making it easier for responsibilities to shift as parents step back.

For the Smiths, this approach appealed as a way for the next generation to gradually step into responsibility – particularly because the oldest sibling was willing to take the lead while the others remained less involved.

CLEARLY DEFINED OWNERSHIP INTERESTS

An LLC allows families to assign ownership percentages upfront and treat them much like shares. This makes it easier to separate financial ownership from day-to-day use of the vacation home.

For families with uneven interest, like the Smiths, this structure can help recognize different levels of involvement without requiring everyone to use the property in the same way.

EASIER LIFETIME TRANSFERS

The LLC structure can also support a gradual transition of ownership. An LLC allows parents to gift ownership interests over time, making it possible to begin passing the property to the next generation while still remaining involved.

This can be especially helpful for families who want to test how shared ownership works in practice before fully stepping away.

In some cases – especially for families with multiple properties – real estate owned through an LLC can then be placed into a trust, combining the benefits and drawbacks of each. This can make it easier to plan for incapacity and add an extra layer of asset protection, but it also means more legal complexity, expenses and tax implications that aren’t right for every family.

Bringing It All Together

For the Smith family, planning for their vacation home meant stepping back to consider fairness, responsibility and long-term expectations. By addressing those questions early, they were able to take the time to discuss as a family and are now planning a follow-up meeting with their estate planning team to make a decision.

While every family’s situation is different, the Smiths’ experience highlights how early, thoughtful planning can help families navigate complex decisions and preserve what matters most.