Splitting Heirs: Navigating Shared Family Property

We spend a lot of time helping families explore their wealth transfer intentions and creating plans that preserve and protect family assets and relationships. It is uncomfortable to talk about money and plan for your death. Trying to design and communicate a strategy that transfers significant financial wealth to heirs in a manner that is perceived as fair and equal is even more complex.

In many cases, families dream of passing on their family home or vacation property that their kids and grandkids grew up visiting. On the surface, it seems like a beautiful gift to leave behind a central gathering place that creates legacy and keeps family connected. Yet, beneath the surface lies a complex mix of financial, emotional, and logistical considerations.

In some cases, planning for what happens with the family properties is an afterthought, if addressed at all. There tends to be an assumption that either, “all of my kids care about the property and it will keep them close”, “sharing the financial burden across the family will ensure it can stay in the family”, or “my family gets along well and will easily figure out how to share ownership after we are gone”. In our experience, for the most part, none are true. Sadly, we have seen family relationships severely damaged based on seemingly minor actions or decisions in the family home, such as someone drinking the best bottle of scotch, wrecking a child’s bicycle (or using it without permission), or decisions around the paint color on the wall or decorations in the home. It is often the things that seem trivial that cause the most damage.

Careful introspection and open communication are paramount to ensuring shared family property becomes a source of joy, not a burden. The following are considerations and recommendations to help navigate the benefits and challenges related to shared ownership of family properties. 

• Avoid Assumptions

We recommend asking children and grandchildren what they want before finalizing estate plan documents. In some cases, the rising generation is afraid to express their view for fear of hurting someone’s feelings. If you feel strongly that you want a property to be held by the family for generations to come – say that. Consider setting up a trust structure to support the expenses of upkeep, taxes and maintenance. If you do not mind if the property is sold, express that to your family members. 

• Explore Options

For many, the goal of passing on a family property is to keep the family close and connected and possibly to provide a gathering place for a family reunion for generations to come. Given the complexity that arises from shared family decision making, we encourage exploring if there are other ways to achieve this goal that do not require leaving behind a shared property. If your family wants to come together annually they may not need one property to achieve this. In some cases there is meaning in a location and family branches decide to buy their own properties to continue to make memories but have independence and agency regarding decisions about their home. We have seen families decide to create a “family fun” trust that provides funds to cover travel and expenses for an annual family reunion.

• Define a Shared Vision

Before embarking on co-ownership, it is important to discuss everyone’s objectives to ensure alignment. For example, one may see the property as a financial investment to be rented out rather than used, and at some point sold, while another may view it as a legacy property to be used only by the family for generations to come. Some family members may view the property as a location for big gatherings and parties while others may be looking for rest and relaxation. Reaching consensus on a shared vision requires compromise and in many cases, needs nonfamily facilitation to achieve.   

• Understand Generational Dynamics

Multigenerational family relationships are complex to begin with.  Needing to make shared decisions, with up to four generations at a time including individuals who live across the globe from one another, can amplify disagreements and tensions.  As family members move through different life stages, their needs and desires for the property may evolve, creating unexpected challenges. In our experience, at the point the second generation’s children come of age and begin having relationships and families of their own, shared ownership and decision making become exponentially more challenging – often causing more harm than good. 

• Define Communication and Decision-Making Framework

Open, honest and transparent communication is integral to success. We recommend families hold facilitated annual family meetings with an agenda that includes a section dedicated to the property. Discuss finances, upcoming repairs, usage plans, and any concerns. Encourage all voices to be heard in a respectful environment. Ambiguity about specific ownership percentages, maintenance responsibilities, and voting rights can hinder clear decision-making and breed conflict. Governance should include proactive agreement around how decisions will be made, who has access to information/voice/vote, process for usage, clear expense management, code of conduct, conflict resolution policy and exit options.

• Create Clarity Around Financial Expectations

Defining how to divide the cost of the property, ongoing expenses and maintenance, among family members can be challenging. Family branches may visit the property less frequently than others and individuals have differing views on renovations and upkeep making a “fair” division of cost difficult.  Shared costs of maintenance, taxes, and potential repairs can be a financial burden, especially if income levels or overall wealth differ among family members. 

• Proactively Manage Scheduling and Usage

We recommend proactively defining who has the right to stay at the property (only owners, extended family, friends, vacation renters, pets) and how the weeks of the year will be divided among owners. There should also be a plan for how upkeep, cleaning, stocking of supplies and repairs are managed.

• Clear Succession

A clear plan for how ownership and decision making will be passed on from one generation to the next is critical.  Beyond ownership transitioning, families should think about how rising generations are prepared to take over decision making and leadership roles. Also, what if scenarios should be explored proactively including what happens if a family member falls on hard times and is unable to contribute, if a family member becomes ill or incapacitated or if a family member engages in illegal activities or brings about reputational risks. Addressing these proactively can prevent future crises.

• Well Defined & Communicated Exit Strategy

Exiting the shared ownership (e.g., buyout, sale) can cause anxiety and hinder financial planning for individual family members. In some cases, after the first generation become ill or pass away, a family branch or individual may not be interested in shared ownership or having a portion of their inheritance tied up in the property. We recommend giving family members a way “out” by being bought out by other family members, or allowing the property to be sold if family members no longer want ownership or the property is causing more tension than enjoyment.

Conclusion

Family shared properties can be an incredible source of joy, connection, and lasting memories. However, their success hinges on thoughtful planning, clear communication, and a shared commitment to addressing potential challenges head-on. By establishing formal agreements and fostering an environment of open dialogue, families can ensure these cherished assets continue to strengthen the ties that bind for generations to come.