family wealth, family wealth management, summer homes, shared assets, asset inheritance

The allure of a family summer home evokes all sorts of fantasies. Long after you’re gone, your children and grandchildren will gather lovingly each year for s’mores by the fire pit, forging bonds that last through life’s hardest challenges. Think again.

Picture this instead, said renowned author Dr. Lee Hausner: Your teenager has a party and invites his friends. Someone gets drunk and spills wine all over Grandma’s couch. The next week your sister shows up with her two young children and becomes furious with you. Now you have an estranged relationship with your sister. “Shared vacation ownership can be a nightmare,” Dr. Hausner said.

Family and the influence of wealth began to fascinate Dr. Hausner while she worked as a school psychologist at Beverly Hills High School. In 1990, she published “Children of Paradise: Successful Parenting for Prosperous Families” (Tarcher) and since has been a sought-after speaker.

Dr. Hausner has long been an expert in creating legacy family wealth and happiness. Her most recent book, “The Legacy Family: The Definitive Guide to Creating a Successful Multigenerational Family,’’ written with Douglas K. Freeman (Palgrave Macmillan, 2009), shows how wealthy families often go from “shirt sleeves to shirt sleeves” in just three generations. She recently became and advisor to the USC Marshall School of Business’ new Family Business Program specifically to help the prestigious school address the unique challenges families face transitioning businesses and wealth from one generation to the next, and will be lecturing from her family business book, “Hats Off To You…Creating Success in Family Business Succession.”

Compare family homes to family-owned businesses. Only about 30 percent of family businesses are passed on to second generations, and less than 13 percent are passed on to third generations. “And these are income-generating ventures,” said Dr. Hausner.

“Shared non-financial generating assets—a boat, airplane, summer home—create the possibility of enormous conflicts,” she said.

Summer homes can be financial guzzlers. If you’d like to leave a summer home in your trust, Dr. Hausner advises also leaving an endowment to pay for the property. This avoids the problem created when there is a need for a capital improvement (e.g., the leaking roof that needs to be replaced) and your partners claim that they do not have the spare cash at the present.  Who is expected to shoulder the financial obligations? Create a governance board, similar to condo boards, so that family members aren’t left trying to figure out how best to run the home. And families should have a healthy system to make what Dr. Hausner calls “cash calls”—discussions on spending money.

“Shared assets can connect intergenerational families,” said Dr. Hausner.  “Businesses can go successfully generation to generation. I have seen businesses transition four to five generations.” The best businesses change greatly over generations, but they remain financial assets.

Often parents do not protect future generations by stating how to deal with conflicts, she said, because they think their progeny will always be in sync. “It’s a ‘family forever’ illusion,” Dr. Hausner says, and it’s a dangerous one. “This is exactly the kind of thing that can cause your kids to stop speaking to each other.”

Aside from the financial drain, family homes have another dimension. “The family home has all kinds of neurotic, emotional attachments,” she said. Grandma may have left a pair of lounge chairs that one daughter refuses to replace, even if Grandma herself would have been appalled to have those old chairs in her home today.

“With multiple generations, there are multiple voices,” Dr. Hausner said. Multiple generations mean multiple lives. That Lake Michigan beach house may have been great for a few years, but your son has moved to Paris and your daughter to California. Their cousins are scattered throughout the Midwest. One son is a teacher who cannot afford upkeep costs that to his attorney brother are a pittance.

Then there’s the question of who will use the place when.  A summer home in Southern California can be used year-round, but that Lake Michigan beach house is fun only about 10 weeks a year. Many a generous relative has spent his winter managing the Excel spreadsheet stating whom can use the place when.

Dr. Hausner offers other options: Help your children buy a condo in the same complex as your vacation home. Or buy a large piece of land with room for everyone to build their own homes. 

When it’s time to sell the family place, again, put aside the illusion of one big, happy family. “Use ‘Best Business’ practices,” she said. Have the place evaluated on the open market. Family members can have a right of first refusal, but only at an open market value.  Then split up the money and go on a trip.

It is helpful to keep families connected by planning special inclusive activities.

Dr. Hausner and her husband treat their two children, their spouses and five grandchildren to an annual family vacation.  Her grandchildren take part in the planning. “It’s a wonderful bonding experience with no conflict,” she said.  The grandchildren stay close to their cousins and everyone is on even footing.

Families do need a unifying activity, she says, and her years of research suggest that there is one great activity that will hold families together—giving money away. Create a family foundation and have the entire family decide how to spend the money. “Well organized philanthropy can be a more satisfying glue for multigenerational families,” Dr. Hausner said.