Copyright 2008, Marc S. Weissman
Certified Specialist: Estate Planning, Trust and Probate Law
Certified by the California Board of Legal Specialization of The State Bar of California
Weiss & Weissman, San Francisco, California
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VACATION HOME

This Article is designed to be of general interest. The specific techniques and information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.

We have a vacation home and want to make sure it stays in the family. How can we do this?

The first option is a Qualified Personal Residence Trust. The QPRT creates discounts as the gift is delayed for a period of years. (The longer the time, the bigger the discount, but the giver must outlive the term selected.)

The next option is an Irrevocable Trust. That is for a current gift, with limitations or protections. This may be similar to the Dynasty Trust. For gifts to children, this qualifies for Prop 13 protection.

Another option is a Limited Partnership or LLC. This is effective for gift to grandchildren or other family members as the property tax protection for parent-child does not apply. With an LP/LLC, an annual tax return is required, as well as $800 per year California minimum tax.

Another option is what I call Direct Deeding, where a Parent deeds shares of a property directly to a Child, qualifying for Prop 13 protection. This must involve use of a signed Co-Ownership Agreement aka Tenancy In Common (TIC Agreement). Co-owned means tenants-in-common. (TIC) By law, ANY Tenant-in-Common may:

Sell / give / bequeath to anyone, freely.

Sue (even a small minority owner) to force a sale of the whole property. ("Right of Partition")

TIC comes in a lot of flavors. Always with a Waiver of the Right of Partition

In SF it is used as a less formal condo method, to avoid the condo limitations.
It is used for investors to 1031 into a BIG deal (1031)
Or for family members to co-own property. For investment or personal use.

A TIC Agreement looks exactly like a Limited Partnership / LLC and may have:

A Manager (like a General Partner of an LP/ Managing Member of LLC)
Capital calls for improvements/repairs. Some clients also fund this need
Selling requires super-majority or 100%
Limits on sale of a share/acceptable (family) recipients at death / divorce / gifts
Asset protection will work the same way as in an LP/LLC

A TIC for personal use property like a vacation home will also require scheduling to ensure fair use by appropriate family members, and perhaps a dispute resolution system just in case. (Example: "If they cannot work it out, Uncle Fred is the Arbitrator").

All like an LP/ LLC.

But no $800/year. And no tax return.

See: Parent-Child Prop 13 Protection

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