One Vacation Home and Several Siblings: Possible to equitably and openly?
April 17, 2007 11:13 AM   Subscribe

My wife and her three siblings have decided to re-invest the money they have received from the sale of their deceased mother's stake in a Cancun vacation home. They want to purchase another vacation home with the money. Together.

The money's on the way and the first order of business is finding a place to park it. The plan was to deposit it into a savings account jointly controlled by the four of them (so nobody feels left out) while they worked out other details (like, which Big Bear, CA cabin to buy). But after a morning's search, it appears that most savings institutions don't allow more than two account holders on an account. Suddenly this simple idea started to look a lot more complicated.

So. Who has experience with one-vacation-home-shared-among-several-siblings? After the savings account situation is settled (which ought to be an easy one!), what other hurdles should my wife and her siblings be wary of?
posted by notyou to Work & Money (12 answers total)
Response by poster: Should have previewed one more time: "Possible to do it Equitably and Openly?"
posted by notyou at 11:15 AM on April 17, 2007

Open four accounts, with even amounts in each.
posted by SteveInMaine at 11:19 AM on April 17, 2007

If they can't agree on how to open an account together, HowTF are they going to own a house together?
posted by DU at 11:43 AM on April 17, 2007 [1 favorite]

They should pre-plan for what happens when one person wants out. A real estate attorney should be able to draft something up for them, but here's the number one thing I'd be concerned about: you've got four people with money tied up in a property, theoretically each owning 25%. Someone decides that what they really want is to buy a Dunkin Donuts franchise and need all their cash out of the house.

Now what?

In an adversarial situation, that person could file a partition lawsuit and force the sale of the property. However no physical possession is worth fucking up a family over. So sit down and come up with some terms everyone can agree on - if someone wants out the other three will equally buy them out based on current market/tax basis, will either produce the cash or arrange a mortgage within 90 days, the person bailing out will take 25% of the amount minus the percentage of the mortgage the other siblings have to get, etc etc.

Remember, there's any number of reasons that one of the siblings might have to get out - they could have some life-changing event, need fertility treatments, get a chance at the job of a lifetime and need cash. They - grod forbid - contract a serious disease and be forced into bankruptcy, at which point creditors will want their share of the 25%. Plan ahead so nobody has any reason for resentment.

Also, solidify arrangements for how taxes and upkeep will be paid for. The last thing they need is an annual potential for conflict because someone didn't plan ahead and the other three have to pick up the slack. Figure out ahead of time what the annual taxes and fees are going to be and set up an account that everyone deposits their share into monthly.
posted by phearlez at 11:48 AM on April 17, 2007

Oh, and that annual fund should include some amount for fixing the roof on a rainy day - every property needs upkeep and nobody wants to pull 1/4 of $8,000 out of their pocket for a roof repair on a place they only spend 2 weeks of the year at. Plan ahead - a lawyer can draft up a trust that is invested in mutual or something and which you can pull expenses out of, and which does annual disbursements based on earnings. Everyone will get a K-1 (I think that's the document) each Jan showing what the investments made and a check for the couple of bucks it made in interest.
posted by phearlez at 11:53 AM on April 17, 2007

I'm sure we all sound like un-trusting heathens right about now... but life is full of harsh realities. One of those realities is that the road to joint-owned family vacation homes is paved with good intentions.

They need an outside Trust to hold onto the funding that can only act upon it by majority sibling vote.
posted by matty at 12:08 PM on April 17, 2007

At one bank I deal with (Wells Fargo) you can have as many people on a savings account as you want. In fact I asked my banker if I could have 100 and he said yes but it would take awhile to enter them all. So, find a different bank and keep it simple.
posted by tr45vbyt at 12:44 PM on April 17, 2007

Second the Trust idea. My dad has a lake house with 3 siblings and they have a Trust set up. Not sure of the details but a real estate lawyer could advise.
posted by pearlybob at 12:48 PM on April 17, 2007

The smart thing to do is put the money (and in the future, the house) in a corporation (or trust, as matty suggests). This provides several benefits:

1) Ownership percentages are defined explicitly in the operating agreement
2) Siblings no longer have a direct claim to the property if they want their money out. They must sell their share of the corporation to you (or another investor) to get out
3) The property is protected from lawsuits for the most part
4) If you choose to rent it out when you're not staying there, this method is also a smart idea tax-wise
posted by chundo at 12:52 PM on April 17, 2007

I have looked into something similar to this (holding property among several people who don't have a pre-existing financial relationship [i.e. aren't married]). The advice I kept hearing was use a trust.

I can't tell you the details but a good attorney or even a Realtor should. You might risk/lose some of the tax benefits, but since this isn't going to be anyone's primary residence and you're not mortgaging, I'm not sure you're losing anything anyway.

There are several ways of achieving joint ownership to property, and it's really something that everyone needs to sit down with a lawyer and discuss. Here's an intro, which hints at some of the options. The big question is joint tenancy vs tenancy in common; the former means that if one person dies, ownership of the property reverts to the remaining partner/s, while the latter provides for shares in the property that inherit and become part of the owner's estate. (That site is actually from the UK, but the basic concepts are pretty similar in the US, at least that I've encountered.)

None of this ought to be foreign to an attorney who handles trusts and estates -- lots of couples and roommates do it all the time. But you need professional advice because there are some serious pitfalls (if one of the people involved in the trust has a high-risk-of-lawsuit occupation, or is a financial/debt risk, that needs to be taken into consideration, plus obvious tax factors).
posted by Kadin2048 at 1:05 PM on April 17, 2007

Response by poster: A trust or an LLC.

I knew this was going to get complicated.
posted by notyou at 2:11 PM on April 17, 2007

Also they need to plan an agreement on usage. Typically each sibling would get 1 week a month or something like that. Do they have the right to rent it out to a third party during their allotted time? How about offering a weekend as a auction item for a charity? They could all agree to rent out the cabin for X amount of weeks a year through a local real estate agent in order to pay taxes/utilities/upkeep costs.
Get an agreement in broad strokes and then see an attorney
posted by readery at 2:56 PM on April 17, 2007

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