How you view the future of your family cottage may not match how your children or their spouses, view their “rights” to the family’ cottage. Children living out-of-state might not want any part of the cottage because they are not able to use it, they can’t afford it, or they simply want to “cash out their inheritance.” Worse yet, they might lose their portion of the cottage during a divorce. These situations can be avoided with a solid vacation property succession plan.
Cottage Planning Laws
Before Michigan created the Michigan Limited Liability Company Act (LLC), many families relied on partnerships, limited partnerships, joint ownership, or co-tenancy for the means of owning family cottages or other vacation property. Each of these forms of ownership have drawbacks to ownership that can now be addressed with a Michigan LLC coupled with other agreements that are utilized to minimize the risk of real estate property tax “uncapping” for as long as permissible by recently expanded laws.
Your Cottage Succession Plan will be structured to keep your current traditions in place while protecting and preserving your family cottage for future generations from massive property tax increases, disagreements, forced ownership changes, family members failing to pay their fair share of ownership costs, etc. Indirect ownership of the family cottage using the correct legal entity can also shield and protect the cottage owners from personal liability in the event a person is injured while at the cottage.
Cottage Sharing Is Not Easy
Below are several common concerns of those facing “cottage sharing” within their family:
- The possibility that ownership of a part of the cottage will pass into the hands of a non-family member as a consequence of death or a divorce.
- A family member wants to “cash out” his or her interest of the family cottage.
- What to do if a family member is not able or not willing to meet any or all financial commitments to the cottage, such as maintenance cost, taxes, insurance, etc.
- The financial impact on the cottage if a family owner files bankruptcy, or a portion of the cottage’s interest is levied by a creditor of a family member.
- Disharmony and even possible litigation between siblings (or cousins) when parents are no longer around to mediate a peaceful resolution.
- How to solve internal conflicts between family members about how the cottage is operated, maintained and improved.
- What happens when a child or children cannot afford to keep the cottage.
Cottage Plan Consultation and Analysis
You have worked hard to have a special place for your family to go, and we want to help you preserve that investment for future generations. For further assistance in protecting and preserving your cottage, contact us for a free initial consultation to discuss the steps you have in place and whether they will accomplish the future plans you have for your family’s use of your cottage or other vacation property.