Including the Family Cabin in Your Estate Plan
July 22, 2014
Especially among the “older” generation, an Up North cabin or cottage symbolizes family unity over time. The family cottage is a place for the family to gather, year after year, to enjoy nature and bond as a family unit.
Often, we see that the younger generations do not view this property in the same manner as the older generations; particularly the generation that purchased the property for the family in the first instance. Therefore, it is important to include the family cabin in your estate plan.
In doing so, here are some relevant considerations to bring to your estate planning attorney:
Method of Ownership. There are a variety of ownership modes that can be selected for the family cabin. If the property stays in the estate of the couple or person making the original purchase, for example, then that person’s estate plan will address how the property is to be treated upon the purchaser’s death. Joint ownership is a common method of cabin or vacation property ownership. Joint ownership can include rights of survivorship or as a partial interest in the whole parcel.
Trust Ownership. Lately, vacation properties are commonly held through a family trust which sets forth the long-term goals and the treatment for the property. Family members then can serve as co-trustees and beneficiaries in such a trust document. This is optimal from an ownership perspective and an estate planning perspective as it avoids the probate process which tends to get messy whenever vacation property is involved.
Limited Liability Company. Another modern trend in ownership is to establish a limited liability company to own and operate the family cabin. In this mode of ownership, family members execute an operating agreement that sets out how the property will be maintained. Owners in an LLC are known as “members”. For large families, multiple members can become cumbersome; give some thought to having each related family providing one member that can represent the interests of that family.
Handling Expenses. The ongoing maintenance and upkeep expenses for the property should be addressed in any estate plan or trust. At a minimum, how the expenses for the vacation property are to be handled should be written-out. Necessary capital improvements should be handled in this manner as well.
Exit Strategy. For those that no longer desire to participate in the operation, ownership or up-keep of the parcel [i.e. if they expatriate or move too far away], an exit strategy should be included in the writing.
These are just a few of the concerns involved in the family ownership and maintenance of a family cabin. It is far better to plan ahead rather than wait until events overtake the family and threaten the continued use of the valued family property.
If you or your family has any of these concerns, contact a reputable estate planning attorney in your area to assist with your planning.