A common problem is the summer cottage loved by generations of a family. The problem (among others) is how to pass this to future generations. Not only are there more people to share decision making, there are more, or fewer, able to shoulder responsibility for maintenance and expenses.
Adding to the complexity are son and/or daughter in laws that may not have the same attachment to the property as their spouses.
In many cases the next generation would like to hang on to the cottage, but cannot make the financial obligations it entails. Fortunately there are some planning options which may allow the children to enjoy the property for another generation.
Use of a limited liability company
Use of an LLC can allow the current owners to maintain control while passing ownership (through the LLC) to their children. This is done by drafting the LLC operating agreement to allow a minority interest (such as the parents) to maintain control. In situations where there are estate tax issues this can allow interests to be transferred at discounted values.
The LLC operating agreement can provide guidelines for payment of expenses, who is in charge and various exit strategies.
Revocable Trust
A simple revocable trust can also hold title to the property. It can provide guidance much the way the LLC does. The trust can sell the property if children cannot get along or decide owning the property is no longer feasible.
It is also important to provide an escape hatch if things don’t work as planned. Children should be able to sell their interest, but it can be provided that the purchasers get favorable terms in order to facilitate keeping it in the family.
Please contact our office if you would like assistance in this type of planning.