Sharing Family Property
Shared family property can be a positive force within families, but it isn't always easy. The prospect of sharing a legacy property can seem overwhelming. There are challenges around use, access, funding, management and decision-making, and ownership transitions. How can a family preserve the memories, values and experiences, and relationships attached to the property, without causing conflict?
North Bridge offers a facilitated process for family members to construct a system for sharing a property. This is not a single conversation, but a deliberate and thoughtful approach to gaining insight and direction from all family members about their goals and dreams for the property.
Dialogue
Before considering “how” to structure a management agreement, determining why a family wants to do it in the first place is an essential first step. Like a mission statement for an organization or corporation, teasing out why you will want to tackle such a project should be clear before figuring out how to do it. Is it to bring family together, or to provide a place for friendships to grow? Is it an investment vehicle, or do you want to make it as accessible as possible for family members of different financial capacities? Is this a place for today’s generation to enjoy, or is there interest in establishing a sustainable structure that can withstand economic challenges and growth in the number of family eligible to share the property?
Structure
Creating a management structure that is fair for everyone isn’t easy. Some family members might feel a deeper connection to a property than others. And some might live too far away to make regular visits practical. Balancing all of these facts requires reflection, discussion, and clear, honest conversation. It takes time to understand what people hold dear, what they view as the culture they want to protect – and to identify who wants to participate. The partnership must also work in the present and be flexible enough to adapt to changing conditions in the future.
Step One: Consider your long term objectives. Start with this inevitable assumption: at some point in the future, the property will be sold. Eventually the family will get too big, the wealth too broadly distributed, and the finances too onerous to continue. So when you think about preserving for the future, what is your timeline? One generation? Two? Twelve? Thinking through this now will have an impact on your structure and approach.
Step Two: Factor valuation into the strategy you choose. Broadly speaking, the more valuable the property the harder it is to keep in the family. Someone eventually will want to sell it and reap the financial rewards. Or they won’t be able to afford the upkeep and taxes. There are a multitude of strategies (trust and corporate structures, deed restrictions and covenants, selling development rights, partnerships with non-profit preservation organizations) to reduce the annual costs or tax exposure for the property. Of course limitations on control go hand-in-hand with these strategies.
Step Three: Determine an appropriate process for decision-making. One of the most critical elements for success in managing family owned property is the decision-making process that is set up to govern the arrangement. How do you decide who gets to use the property and when? What is the financial structure for payment and upkeep? How do you manage repairs and capital improvements? What are the agreements if a family member wants to pull out, can no longer afford their share, or gets a divorce? An established and codified governance structure and financial plan is an essential element of any successfully shared property.
Our goal is to create viable and enduring management structures that can help keep
the family and property together for generations.
the family and property together for generations.