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Settling the Summer Home
Estate Settlement

In the estate settlement process, we are often involved in events that have financial, legal and psychological dimensions—often intertwined and concurrent.

For example, we recently helped a Connecticut-based family think through the complex issue of the disposition of their beloved summer home on an island in Maine. The parents had bought the sprawling beach house for next to nothing in the 1950s, and the three children had spent long and happy summers there for decades. When the father died, the house passed in trust to his widow, who decided to live there year-round. Although one of the three children had moved to California and didn't get back east very often, the other children—now adults—started bringing their own children to the island in the summer.

When the mother died at the age of 91, the next generation had to decide what to do about the house. Their cash inheritances were not large; in fact, the waterfront property was the largest single asset in the estate—now valued around $3 million, with annual taxes exceeding $20,000. Very little had been invested in the main house over the previous two decades, and a substantial sum was needed to stabilize and restore the property. Finally, a separate building closer to the beach presented a challenge, and an opportunity: if the town would give a variance to let the family replace the building's failed septic system, that would create the potential for a rental unit on the property—which might increase the overall value of the property by as much as 25 percent.

We engaged a real estate professional to appraise the property, and to prepare an inventory of needed repairs. We worked with a local zoning expert to figure out the feasibility of a zoning variance. Then we explained the family's options to them, which ranged from an immediate "as is" sale to the creation of an LLC to keep the property in the family. We ran scenarios that showed what their individual financial situations would look like with and without this large illiquid asset (and its associated expenses) included. The California-based sibling pointed out that she didn't want to be an equal partner in an LLC, since she wouldn't have equal opportunity to enjoy the house.

With all of these facts and options on the table, the siblings decided to sell. They fixed the house up to an acceptable level for sale, successfully pursued the zoning variance, and sold the property for their asking price within days of putting it on the market. Each of the three siblings invested their share of the proceeds with our help—including the one who decided to put a large percentage of his inheritance in a smaller vacation home on the same island. His siblings now visit him in Maine, thereby continuing a cherished family tradition into the next generation.

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