When it comes to owning a vacation home, this adds a further layer of estate planning necessity to your considerations. A vacation home might be a place of cherished memories for you but it is possible that anyone you wish to leave it to will not get along with any other co-owners or be unable to arrive at the same conclusion about the purpose or future of the home.
This can create unnecessary family conflicts and problems and the more work you can do in advance by consulting with a lawyer the easier it will be to get a real read on what your family members want and the next best steps to take with the vacation home. You can make outright gifts in trusts or give your children all or partial interest in the vacation home. You can also place the home in an LLC and then make gifts from those interests.
Remember that the tax cost basis of the vacation home in the hands of those who receive it will be the same as your basis plus any amount of gift tax paid. Under current laws the basis of the vacation home will be stepped up to fair market value. Because a vacation home has so much potential impact on your future, it is vital that you discuss these options with both your family members and your estate planning lawyer.