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| Best Practices: Estate Planning |
Paradise Lost
Louise Kramer
12/01/2005
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For 50 summers, Ken Huggins had an idyllic retreat at his family’s oceanfront
home on Nantucket Island off Cape Cod in Massachusetts. As a child, he
particularly looked forward to fishing expeditions with his father, E.V.
Huggins, a Wall Street tax lawyer turned Westinghouse executive. His own son,
Jeff, caught his first fish, a scup, there at the age of 4, and Huggins has a
vivid memory of the pride he felt watching Jeff—who is now 27—race home to show
his catch to Grandpa. “I felt like a tradition had been passed from one
generation to another,” he says.
 Huggins, now 61, is an English professor at
Monroe Community College in Rochester, N.Y., and until a few years ago, he
assumed the end of every school year would mean it was time to pack up the
family and head for the beach house. When he was a youngster, he felt more
attached to the vacation home than to the family’s “real” house in northern New
Jersey, as did his brother and two sisters. “It didn’t have the magic of the
summer house.”
When their mother died in 1997, 12 years after their father’s
death, Huggins and his three siblings inherited the Nantucket property, which
the family had expanded over the decades to two houses on seven acres. Even so,
within the first few years, it became clear that there was not enough room for a
bevy of heirs and their own families. Preteen squabbles resurfaced. One of the
sisters, Judith Huggins Balfe, claimed that her other brother, Bob, got the best
terms, just as he was treated the best when they were kids. Huggins was miffed
because Judith had garden work done without consulting the others. There were
spats over contributions for maintenance.
TOP VIEW
Happy summer memories faded when four grown siblings inherited their parents’ 10
beachfront acres on Nantucket Island, and internecine squabbling over its use
and financing began to take its toll. Particularly in an environment that has
seen property taxes triple and quadruple in luxury markets, watertight financial
and estate plans are essential if you want a cherished vacation home to become a
legacy that stays in your family. Beyond the finances, heirs also need a formal
operating agreement to address everything that can tear a vacationing family
apart, from philosophical disagreements to bickering over who owns the old
outboard motorboat. |
E.V. had planned the dispensation
of the property by talking it over with his accountant and with Bob, his elder
son. He essentially presented the plan to the rest of the family a fait
accompli. “Dad dealt with his first son. Being a man of his generation, that is
what he was expected to do,” Huggins says.
Bob bought his siblings’ interest
in the older house, as per the will’s terms, leaving them an endowment that was
supposed to cover the operating costs for the second house. But property taxes
escalated faster than the principal grew, and it became clear to the siblings
that the endowment was not going to be enough to cover the annual operating
costs. In 2003, they sold the house for $3 million. Shortly thereafter, Bob’s
daughters sold his house. The family eventually reconciled, but Huggins believes
that much of the acrimony could have been avoided.
Huggins now finds his
fond memories clouded by the complexity and high emotion of managing and then
selling the family home. When he and Judith, a sociologist who died in 2002,
realized there were virtually no guides on inheriting and managing vacation
properties, they wrote one themselves. The result is a 64-page book entitled How
to Pass It On: The Ownership and Use of Summer Houses, available at
www.Amazon.com.
A Business Retreat
Huggins is the first to point out that his family’s
plan failed to anticipate both the financial and the emotional concerns that go
into this kind of operation. “If I had the power to do things differently, I
would have involved all of us directly instead of working primarily through my
brother,” he says with the wisdom of hindsight.
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