Family properties can be a wonderful source of unity but they can also cause conflict when the ownership, management and maintenance issues that they inevitably involve are not dealt with in a thoughtful manner. To ensure a property remains a gift rather than a burden to future generations, here is a list of questions and concerns that families should discuss and work through.
1. What is your goal in gifting the property to the next generation?
If, as parents, your intention is to provide a place for the family to gather as a group and create memories for generations to come then talk with your adult children about this. Do they share that vision? Find out their perspective by asking them, do you want to own this property together as siblings? What concerns do you have? How does your spouse feel about this? Then be prepared with ways you may respond and options if your adult children tell you they don’t see shared ownership as a good idea.
2. What are the property expenses and how will those be managed and covered?
In order for a property to truly be a gift, you need to provide full transparency on the costs and funding that go along with ownership. Does the property have any known repair issues that inheritors should be aware of? What are the typical annual costs for maintenance and upkeep? Will inheritors be responsible for these expenses or will there be a trust or other reserve fund to cover these costs? If inheritors will share expenses, how will those be allocated – equally or based on usage? How will decisions be made if some family members wish to make improvements or changes to the property while other family members view that as unnecessary?
3. What do we need to consider in terms of property usage and scheduling?
How will those decisions be made and by whom? Will there be a rotation schedule as to who gets access when or will those who live close by and use the property more frequently share a greater portion of the upkeep and expenses? Will renting the property be allowed and if so, what are the legal considerations involved? What if young adult grandchildren want to bring a group of friends for a weekend, is that allowed? Can owners, or their children, allow friends to use the property without a family member there?
4. Who will be the primary “property manager?”
This will be the person who takes on administrative tasks like paying the bills, hiring and oversight of any maintenance workers, ensuring taxes on the property are paid. When this role is not assigned things can either fall through the cracks (maybe literally) or one person feels the burden more than others. These responsibilities can also be spread out or people can alternate being in this role. If one inheritor lives close by, they may agree to take on these ongoing administrative tasks either because they use the property more frequently or in exchange for another owner covering a higher percentage of the costs.
5. How will we handle changes in family circumstances and ownership needs over time?
What if a family member passes away? Does his or her spouse remain an owner of the property? What if one branch of the family relocates across country or internationally for work? What if one sibling or cousin has tighter financial resources than another and cannot afford to remain an owner? These matters should be carefully considered and clearly defined in a buy-out provision or exit plan. It should cover issues like whether or not someone can sell or pass on their ownership only to family members or outsiders. If outsiders, do the remaining owners get to approve prospective buyers? How will the value of ownership be determined? Under what circumstances would the property be sold in entirety?
6. How will the property be titled and legally owned?
The ownership structure impacts tax filing, property liability, and future transitions. The most typical ownership structures for family properties tend to be limited liability companies (LLC) and trusts. An LLC has advantages in terms of clearer governance and operating agreements, more defined buy-sell provisions, liability protections and entity accounting. Trusts provide greater asset protection, a focus on long-term family ownership and stewardship and enable you to pass ownership via your estate.
7. What will be our process for ongoing communications and decision making?
Regular communication is key to preventing misunderstandings and conflict. Make it a priority to schedule an annual meeting to discuss the issues involved with owning the property and talk about how you will make group decisions that everyone can feel comfortable with. The best approach is to put things in writing once you come to a verbal agreement about ownership, usage and expenses. An attorney can help the family structure for both needs and tax efficiency.
Shared family properties become a cherished gathering place not because families avoid difficult conversations, but because they address them early, openly, and with clear agreements in place. No one wants financial responsibility for an asset without having a meaningful voice in how it is managed, which makes fair decision-making processes and defined governance essential. When expectations, responsibilities, and structure are thoughtfully established, a property can remain a source of unity rather than becoming a strain on family relationships.
The material shown is for informational purposes only and should not be construed as accounting, legal, or tax advice. Although we made efforts to verify the accuracy of the information, Altair Advisers cannot guarantee its accuracy. Please see Altair Advisers’ Form ADV Part 2A and Form CRS at https://altairadvisers.com/disclosures/ for additional information about Altair Advisers’ business practices and conflicts identified.