Holiday Home Family Trust
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Keeping the holiday home all in the family
Family holiday homes conjure images of idyllic summers lazing by the seaside. But without careful planning and communication, they can also be a lightning rod for financial and emotional rivalries.
Liz Jensen, left, with daughter Rebecca, right, son-in-law Kael and grandchildren Roy and Oliver at the family beach house in Sorrento. Arsineh Houspian
At Blairgowrie on Victoria's Mornington Peninsula, a modest single-storey beach house has hosted the extended Neales family's Christmas festivities for 55 summers and four generations.
"Jumping into the rock pools at the back beach has become the Blairgowrie baptism, a rite of passage for visiting children in the family," says Sue Neales, whose parents, Elisabeth and Tom, bought a block of land that backed onto the back beach in 1958 for about £70 (about $2200 in today's money).
Six years later they purchased a half-built fibro beach house – no mains water, inside toilet or bathroom – on three blocks of bush for about £2500 (about $70,000 in today's money).
Today, it continues as a traditional family stomping ground for their four children, eight grandchildren and three great grand-children.
'Baptism at Blairgowrie' has been a Neales family ritual for five generations. Supplied
Blairgowrie is a coastal holiday hamlet attempting to retain its tea trees and modest beach house streetscapes against a rapidly encroaching suburban sprawl, which is inflating house prices: a luxury two-storey beach house with bayside views recently sold for a record $3 million.
Holiday homes can be a lightning rod for deep-seated financial and emotional rivalries. They can also create new problems as tempers fray over who gets to use it at which time of the year, particularly around school and public holidays.
And the Neales' getaway, worth about $1.5 million, has now become a significant monetary asset and a tempting nest egg.
"We've not sat down and discussed what will happen in the future but it is understood we will keep it," says Sue Neales. "For the moment everyone is muddling along."
The Neales family believes the shared work and joys of a family holiday home help to build cohesive relationships and closeness of kin. But Jeannette Lawrence, an associate of psychology at University of Melbourne who researches inheritance issues, says the "dynamics between generations of family members are incredible", and warns best intentions can become "messy problems" capable of turning a summer idyll into a nuclear winter.
Each dispute, from plants chosen for the garden to replacing the curtains, can descend into symbolic battles for control.
Discussions about whether to keep or sell a property – or whether to renovate or leave it as it is for nostalgia's sake – can create grievances over how to align contribution of costs with access.
Eileen Webb, a professor of law and ageing at the University of South Australia, says an increasing number of families are taking their property and inheritance disputes to court, particularly "blended families" where remarriage resulting from divorce or death leads to new families being formed.
"There are so many permutations and you need to look at all contingencies, including worst-case scenarios such as someone wanting to bail out," says Webb. "It's not just a case of saying it is in the family and we will always get along. Sometimes they don't and it can go horribly wrong."
A five-minute drive up the coast from Blairgowrie is a Sorrento holiday home with sweeping views of Port Phillip Bay shared by the Hart family. Like the Neales family, the Harts have been spending their summers at their holiday home for 55 years, or four generations of the family.
Liz Jensen (nee Hart) happens to be a director of Kay & Burton, a real estate agency in Portsea – the nearby summer retreat for Victoria's rich, where timber beach boxes on the foreshore sell for $1 million and house prices have topped $20 million.
She says an increasing number of buyers of holiday homes in Portsea and Sorrento are also looking for places that they can share with their children, grandchildren and great-grandchildren.
Jensen, whose parents bought the land and built the beach house in 1965, wants the two-storey holiday home to stay in the family so long as it continues to bring the family together and build kinship.
"Otherwise I don't want it," says Jensen, a grandmother who lives in the property next door.
Law professor Eileen Webb. Supplied
"It was used as an Airbnb for a short time and I hated it. I told my children I would sell my own home and they could do what they wanted with the family property," she says about the family home, for which ownership and control is set out in a family trust.
"For me, it has to be utilised by people who love it or I will not keep it."
Brian Hor, a special counsel for superannuation and estate planning with Townsends Business & Corporate Lawyers, says more people are setting up trusts to hold their holiday homes, typically linked to a will.
Will trusts can remain active up to 80 years after the death of the parents, which means holiday homes can be protected for multiple generations.
"The parents can choose who controls the arrangements as a trustee, and specify how decisions are made, how to resolve disputes, appoint third parties as a referee and manage, if necessary, any disputes," says Hor.
It can also specify conditions and restrictions, such as access and obligations for upkeep, maintenance, sharing of rental income, and what happens and when on disposal.
Jeannette Lawrence says later generations are more likely to fix problems created by their predecessors, as time and experience begin to cool the emotional heat generated by the death of a parent.
That's the experience of Sydney's Rafferty family. Following the death of their mother, three brothers, three sisters and their families inherited an heirloom hobby farm in the Southern Highlands of NSW. They have agreed to put the farm into a trust for five years before making a decision on whether to hold or sell. During that period they will share maintenance costs, which total about $5000 a year.
"There is so much of Mum there," says Cushla Rafferty, one of the six siblings. "It's still too raw to make a decision. We'll address it in a few years."
Inheritance specialists suggest that family members who cannot afford to share expenses be given extra responsibilities in lieu of cash payments. Alternatively, a house might be rented for part of the year to help cover expenses.
The Rafferty clan inherited a hobby farm in the remote NSW Southern Highlands.
The Neales family, which has adult members in Singapore and the UK, has no formal arrangement and relies on working bees and cash contributions to keep their holiday home running, with family members generally accommodating each other's plans.
In contrast, the Hart family set up a family trust run by Liz Jensen's brother, David, which sets out the rights and responsibilities of the five beneficiaries.
Their holiday home is currently being rented by Jensen's daughter, Rebecca, until the end of summer. "This is an experiment," Jensen says.
Webb recommends families draw up a written plan that specifies owners and paying expenses, including insurance and taxes, or the creation of a trust.
The written plan is also likely to outline who has access at Christmas, school holidays, long weekends or any other popular times.
Webb also emphasises that families should discuss what they expect out of an heirloom home long before any cathartic event, such as a death, forces a decision. This might also involve a lawyer and a financial adviser.
In some cases, selling could make the most sense because family members might not be able to afford their share of the maintenance, taxes or cost travelling to the property.
"Discuss it with the family," recommends Webb. "No one wants a brawl. These sorts of disagreements fracture families and it can be so easily avoided with a bit of foresight and appropriate advice."
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Source: https://www.afr.com/companies/financial-services/keeping-the-holiday-home-all-in-the-family-20191230-p53nn2
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