7 Questions to Ask When Considering Owning or Sharing Planes & Vacation Homes
Author: Jack Thurman
One of the greatest benefits of a family’s financial success is having choices in numerous areas of life. For example, a family may choose where they live, schools for their children and grandchildren, careers and how they spend spare time in retirement. Families also can determine how they travel and where they spend their vacations. As a family begins to analyze choices about travel and vacations, the selection process may be as complex as the U.S. tax code, particularly when it comes to aviation and vacation homes.
Families should begin with basic questions of whether they want to own a plane or home outright or share with others. Ownership comes with many considerations, such as the maintenance, liability and taxes. But, there also are unique considerations when determining if you want to share the costs of a plane or vacation home. Below, we outline a few elements important to consider when it comes to the ins and outs of fractional ownership versus outright ownership of plane and vacation homes.
Is This Right for Me?
Early on, it’s best for individuals and/or families to determine their probable usage and flexibility of a plane or vacation home. How many hours do you plan to fly in the coming three to five years? Do you want/need the same size aircraft with these trips, or do you want choices in the size and model?
In the area of vacation homes or destinations, if the decision is made to share costs to minimize maintenance expenses or provide flexibility in locations and amenities, then the choices exponentially expand amid options of private residence clubs versus fractional ownership versus time shares. Another element to consider with vacation homes is the preferences of locale, number of days or how frequently a family plans to use the home, quality of amenities and notice needed to reserve the property.
Does This Make Financial Sense?
Aside from usage logistics, there are large financial questions and choices about aviation and vacation destinations. What upfront investment do you want to make? What ongoing expenses do you want to incur? What, if any, residual value do you want at the end of using the plane or home? It’s also imperative to consult with an attorney and CPA about the legal liabilities and tax considerations each direction may incur.
With this blurring array of questions and options, you should invest considerable upfront time before making any decisions.
Be sure to have a thorough discussion and document the answers to seven big-picture questions, which can ultimately guide the decision toward fractional ownership or outright ownership.
- Why are we considering this decision to acquire a plane or jet or vacation home?
- How often will we use this?
- Who will we use this with?
- When will we use it?
- For how long do we expect to use it?
- How much do we want to invest upfront and over time into this acquisition?
- What will we do when we no longer want to use the plane, jet or vacation home?
Plane and vacation home ownership—whether fractional or outright—is certainly a decision that shouldn’t be made lightly. Given the ins and outs of both types of ownership, individuals and families should be sure to review not only the monetary commitment, but their long-term desires and goals as well. For more information, please contact us.