Lifestyle What makes the perfect vacation home?

Your vacation home is meant to be a place of fun and relaxation for your family—a place where memories are made and relationships are strengthened. Spending a little time back in the “real world” planning for the best way to buy, build, or manage your family gathering place will allow that legacy property to be a multigenerational escape for a lifetime or more.

Your Truist Wealth advisor can help make your vacation home aspirations real by helping you plan for factors ranging from cash outlays to tax rates to estate plans. But the first questions to consider are only adjacently connected to your finances. Ask questions like, “Where would our dream vacation home be located?” “What would we use it for, and how often would we want to go there?” and “What sorts of amenities do we want the house and the location to offer?”

Poring over design magazines and watching videos about possible locations with your partner or family are part of the fun, but once the broad outlines of the dream family vacation home are in place, it becomes even more important to bring your wealth advisor into the conversation frequently. Here are three critical areas where the numbers and expertise an advisor can provide will have a big impact on making the dream a reality.

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Even if you’re planning to pay cash and don’t have to be concerned with a mortgage, there are other financial concerns to discuss with your advisor. First, it’s prudent to consider how much of your net worth you want to devote to the vacation home.

As with all major investment decisions, risk tolerance and portfolio diversity play into the decision. A family with multiple income streams might be comfortable having 20% of their net worth tied to the vacation home—that would be a $5 million home for a family worth $25 million, for example—while a couple close to or in retirement might want to keep such an illiquid investment to 10% to 15% of their total worth.

Most affluent households considering a vacation home prefer a move-in ready house.^{Disclosure 1}

Even if you and your partner are fully funding the vacation home, you may think of it as a family property—a place for kids and grandkids to gather—that will become a part of the legacy you’ll leave to future generations.

Who actually owns the property may impact family dynamics. Including adult children in formal ownership may encourage them to visit more often and consider the property part of a treasure they share with their parents. But the legal ownership structure also impacts tax treatment and questions including liability, estate planning, and conflict resolution and so requires careful consideration. Common choices for the structure of a shared ownership agreement include limited liability corporations (LLCs) and family limited partnerships (FLPs).

While the ownership structure will determine the legalities of estate planning related to the property, your wealth advisor can help identify issues to talk through such as determining if individual heirs would rather inherit an ownership stake in the home or some other asset of similar value, and how owners and family members will resolve any disputes on use, maintenance, or expenses that arise.

Buying or building a family vacation home is, by definition, a limited-time process, but in theory the actual running of the home may be a multigeneration endeavor. Having well-thought-out processes in place from the start will make that job easier for everyone who will have a role and keep the focus on family fun rather than property management.

No matter the size of the property, somebody will have to look after it, even if it’s just someone to mow the lawn. But larger properties will require significantly more care up to and including a full-time, live-in staff.

Owners have options when it comes to hiring caretakers, each with financial and logistical considerations. Hiring directly provides for the most control but also comes with a full set of obligations including payroll, tax, and benefit expenses and recordkeeping. Hiring independent contractors lessens the paperwork but also lessens control over scheduling. A property manager would handle all of that, but you might not even know who is actually working at your house.

If you choose to rent the property out, then a property manager is a necessity. Particularly if the home is to be advertised as “luxury,” it’s important that you choose a manager with expertise in that market segment and who offers the associated level of service both for you as the owner and for the guests who will stay there. That means a full suite of marketing, booking management, and maintenance services, plus a level of attention to detail in guest services that a luxury renter will expect.

Another management principle to consider early on is the actual use of the property—how often and by whom. Can family members use it on their own, or do the primary owners need to be present? Does everyone get an allotted number of days, and how will those be determined? Is there a reservation process, and how will that process work alongside rental reservations? And if anyone ends up fighting about it, how will it get settled and by whom?

Family dynamics will influence how those conversations take place and how the questions are answered, but having more information about the expected costs of a second home and its place in a family portfolio will help you make good decisions. In the end, the goal is to have a place for family and friends to come together, to make memories, and to create a legacy that will span generations. Conversations with your Truist Wealth advisor are a great resource for making the vacation home of your family’s dreams into a reality.