Many of you likely spent our Nation's birthday with your family and/or friends at a cottage (or "cabin" if you're from Minnesota like myself). If the cottage belongs to you, or to your grandparents, parents, or other family member, do you have a plan in place to keep it in the family? Family cottages hold fond memories and strong emotions for almost anyone that grew up going to one. Any time more than one person is involved with something that holds so much sentimental and monetary value, there is the opportunity for hard feelings and family feuds. Having a cottage succession plan in place can avoid many of the common arguments that cause family tensions. A cottage plan treats the cottage like a business. An operating agreement of sorts is put in place to address the main areas of contention between family members. Some of the most common issues include:
(1) Who pays for maintenance and improvements on the cottage,
(2) How are taxes and insurance paid,
(3) If multiple families are involved, which family gets to stay at the cottage on which dates,
(4) Who will inherit the cottage, and
(5) What if a family member wants "out".
With a cottage operating agreement in place addressing these issues, and all owners of the cottage signing and agreeing to the agreement, when an issue comes up there is an immediate resolution – what did everyone agree to? Not all families are created equal, and some are in a better financial position to maintain a cottage than others. However, if a cottage plan is in place, the grandparents who purchased a home on Lake Michigan for next to nothing in the 1950's can pass the enjoyment of the cottage onto their grandchildren regardless of their grandchildren's annual salary. For more information on how this is possible, and for information on setting up your own cottage plan, please call our office and/or feel free to attend the Cottage Law Seminar in Holland, Michigan on July 21, 2011.
(Editor's Note: Attorney Jessica DesNoyers authored this post while working in Varnum's Grand Haven office. Jessica is currently with another firm.)