You’re describing the scenario that led to a great deal of heartache and broken relationships in my family for a variety of reasons I won’t go into. All the siblings together need to agree to talk to a lawyer and arrive at a legal structure that is then written into your parents’ will. You also need a management structure.
TL;DR: Good that you’re talking about this now. My family discussed ideas, didn’t get to an agreed solution in writing or in the will, and outcomes were bad. Don’t assume everything will go fine because you’re related and you love each other–in fact, that makes it worse. If you all ask “What structure would I want in place if I were entering into this like a time-share with total strangers?” THAT is the structure you want to create.
Backing up from that, ask yourself “If Mom and Dad didn’t already own this place, are my siblings people I would want to enter into a financial shared ownership situation with?” Be honest. Pretend inheriting this isn’t an option and ask yourself if you’d invite them all to buy property together. Have them all go through the same thought exercise at some point.
A few things to think about:
– Are you all truly equally interested in being co-owners and carrying the expenses? What happens if someone can afford to be a partner in this now, but not in the future? If you’re at different life stages–some with kids, college expenses, major medical, and others not–this is trickier but even without that people’s financial situations change.
– If some of you want to co-own, others don’t, can the new owners (because that’s what they are) afford to cash you out at fair market value for that share? If not, they’ll need to mortgage or re-mortgage. Can they get that financing? If none of you can truly afford to own this place–as in, would you all go in together to buy a place to share if this didn’t exist–then selling it may be painful but it’s a cleaner path forward than creating a new financial burden.
– What happens at the next generation? If some of you have children and some of you don’t, how is the value of the property dealt with? Sibling A has kids who want to inherit, Sibling B doesn’t, so Sibling A buys out the value of Sibling B’s share so Sibling B can dispose of the cash through their will however they choose?
– How are the costs of maintenance being handled now? If your parents are paying for everything then the cash you would otherwise inherit is being invested in the property to maintain/increase its value. So if someone doesn’t want to be a co-owner, they shouldn’t get less cash based on the remainder of the estate. They should have a share that’s bought out by the others at fair market value based on an assessment. Trust me–if this doesn’t happen it leaves deep scars.
– If you have a calendar keeper now and it feels like it’s managed fairly, great. What happens if it isn’t being handled fairly? Say, the same people get the weeks with the best weather year after year, or always get the 3-day weekends so they get more time without using as much vacation. If that’s a sticking point now it doesn’t get better and you should fix it–maybe a lottery or alternating order of selecting dates. Don’t avoid talking about that by trying to “be helpful and take a load off Sibling A who’s been doing it all these years”; name that it’s a question about equitable scheduling opportunities and you need a system that everyone feels is fair. And what happens if the calendar keeper doesn’t want to continue in that role?
– Think of this as co-owning a rental property. Would you manage it as amateurs or would you get a property manager? That might be the best way to go.
– How will you budget for major repairs? What happens when it needs a new roof? Are you going to assess some sort of dues and build up a fund for that? What happens if someone has a financial problem and can’t pay their dues for a couple of years–are they kicked out, do they owe and try to catch up, do others forgive them because they’re family? OK, now spin that forward a generation and ask how distant cousins will want to deal with each other in the same scenario.
– Are you all going to be able to use it equally depending on distance? Will you/they want to keep paying for something you may not end up using as much as someone else?
– Once you’re locked into this as a financial commitment, not a place you love that your parents are paying for, it will become the vacation you have to take because it’s already paid for. Is that how you want to plan your vacations for years to come?
– The place needs to be insured. If your parents end up as non-homeowners (in assisted living for example) they no longer have that policy to add it to so someone has to be a co-owner to carry it on theirs. You can’t all be on an insurance policy if you’re handling it as individuals rather than through some kind of trust or LLC or whatever vehicle the lawyer will recommend. Now one sibling is on the title. How do you untangle that later when they say “Mom and Dad wanted me to have it because I took care of it so now the property is mine?” Trust me, you don’t, and that way lies bitterness. Anything that’s going to rely on “Mom and Dad would have wanted…” has to be in the will. That’s where Mom and Dad write down what they *actually* want.
– The taxable value of the property may be a factor in future sales due to capital gains. My memory of the tax law needs to be checked. I believe it’s that if the property is transferred before they die the base is the original purchase price; if it’s transferred as part of the estate the base moves up to the new market value. This reduces the amount of future taxes paid if it appreciates quite a bit. But tax laws have changed since I needed to think about this so maybe it’s not an issue.
– The memories don’t disappear just because the property doesn’t belong to you in the future. Plan some great gatherings now with your parents there, take lots of pictures and video, record people telling stories about their happy memories. These are great to have anyway and it’s better to get them now before any of the legal and financial complications enter into your family relationships.
Good luck. Come back later and tell us what you did!
