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Perspective NewsletterThis is the time of year when families across the country gather at shared properties to bring together generations, celebrate traditions, enjoy quality time and bond through communal experiences. These properties often provide a sense of place and a stable connection that remains unchanged amid all the other changes in life. While most shared properties bring joy and create an incredible connection across generations, some form of conflict is often inevitable.

Conflicts can revolve around finances, but other non-financial factors drive tension including: access and usage issues (i.e., can you believe they are taking New Year’s again?), renovation disagreements (they think we should modernize the kitchen; I disagree), maintenance and upkeep (it feels like every year we are doing the spring cleaning), and varying standards (can you believe they didn’t change the sheets last weekend?).

Many professional advisors recommend selling a shared family property to avoid conflict and upset family relationships. This may be the right thing to do for your family, but before making this decision it’s worth considering the options. Keeping a shared property in the family requires clear communication, thoughtful planning, structuring, commitment, and of course financial support. There are key steps families can take to help make the decision and navigate conflicts when they arise, being mindful of inherent challenges with the transition to the next generation.

Jamie Forbes suggests a helpful three-step process in his chapter on family vacation homes in Wealth of Wisdom: The Top 50 Questions Wealthy Families Ask.:

Step 1: Deciding to Hold the Property or Transition Out (Owner Discussion)

Hold a discussion with the current ownership group and ask the following questions:

  1. Do you need the proceeds of a potential sale for another use?
  2. Does the family have an attachment to the property?
  3. Does the family enjoy the property together?
  4. Have family members expressed interested in keeping the property?
  5. Do you think the property would help maintain family relationships?
  6. Are some family members more interested than others?
  7. Would keeping the property put a financial burden on your family that may create stress?

This step allows you to craft the vision for the property and understand the major challenges to overcome to achieve this vision.

Step 2: Gauging Interest and Willingness (Family Discussion)

While exploring the notions of keeping or selling, the next step is to meet with the rest of your family. This will help determine what is feasible for the future of the property and those that use it. If you are exploring selling, this will provide reasons, so everyone is aligned and understands the rationale. If the decision is to hopefully keep the property in the family, seek input from your family. This step will help clarify what family members want to do and begin exploring how that might work. The conclusion may be to sell, or it may lead to the creation of a specific plan for transitioning the property to your children.

Step 3: Creating a Working Plan (Family Discussion)

This step requires detailed discussions and is generally the most time consuming. It will help develop a clear understanding of what will be required for your family. This will involve creating a structure and process for management, usage, decision-making, and capital investments (and documenting it!). The critical aspect of this step is discussing how conflicts will be resolved. Some items to discuss:

  • How will the family deal with financial disparity?
  • What if some can contribute more financially?
  • How will new family members be included (i.e., marriage, new generations)?
  • How will ownership transition (i.e., divorce, death or for financial reasons)?

Tips During the Process

Jamie also suggests the following approach to what can be challenging conversations.

  1. Don’t force the discussion. A death in the family or terminal illness creates a sense of urgency, but the process should begin well before decision are required. Consider using a professional facilitator depending on the size and complexity of the family.
  2. Observe behaviours. Emotionally charged topics such as money and legacy family properties can be very revealing. Use this discussion to anticipate how the family will work together with a shared property. The discussion will reveal how engaged certain family members are.
  3. Discuss potential conflicts. These might include financial factors, access, upkeep, renovations, etc. You won’t be able to anticipate every possible conflict, but the more you discuss the potential conflicts you can brainstorm how the family will handle them.
  4. Document the vision. This can be a short paragraph statement which is a reference point for making decisions and resolving conflict.

Creating and Endowment for the Property?

Some families ask: should we setup an endowment to fund expenses for future generations? Endowing will remove hierarchy from a financial perspective. It will delay financial inequity, which inevitably comes as families expand across generations. But endowing the property does not remove the possibility of other non-financial conflicts, which can be more pervasive than financial factors.

Practical Tip

SharedKey.com helps families organize and manage properties for your family, friends, and other guests. The site includes a calendar for booking, organized place for helpful instructions and house rules, contacts for neighbours and key services (repairmen, food services, etc.) and a notice board which acts as a centralized communication hub for reminders of supplies, events, and maintenance. The platform was started by a Canadian family who needed a solution for their own family: www.sharedkey.com

Questions for Further Reflection

Jamie provides a few good questions for reflection on the whole process of evaluating shared properties.

  1. What are you trying to preserve?
  2. What are some of the things you find most meaningful about the property?
  3. Do others share your vision?
  4. Is your vision realistic?
  5. How willing are you to let your family manage without your input?
  6. How will you feel if it works?
  7. How will you feel if it doesn’t?

Shared legacy family properties can build long-standing family connections, provide a lifetime of memories, and create continuity through generations. With a desire to keep the property in the family, proper planning, and effective ongoing communication, your children can walk the same sandy paths and swim in the same water as your parents. We have guided many of our clients’ families through this important planning process. A strategic, thoughtful, transparent, and open process allows for effective and sensitive group decision making and good family decisions.

 

Northwood Family Office

Brad Jesson

Brad is a member of Northwood’s client service team and works with families in the areas of financial planning, investment management, and taxation.

Brad graduated with a B.Com from the University of Alberta, and holds a CPA designation in Canada, a Certified Public Account designation in the United States, and has completed Part I of the CPA In-Depth Taxation Program.

Brad is active in his community volunteering with several non-profit organizations, including Free Play for Kids which provides free access to sports for thousands of vulnerable kids annually.

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