The emotional value of a family lake cabin is enormous, for every member of the family. Lake cabins are where cherished family memories take root and endure through the years. Should you be fortunate enough to own one such keepsake, its preservation for current and future generations is of vital importance.
The Wall Street Journal recently explored using trusts to safeguard a family vacation home in an article by Alex Coppola. When the current owners – parents or grandparents – are concerned that joint ownership could lead to unfortunate disagreements or that the cost of maintenance may prove too significant for the next generation to manage, a trust can be the best solution.
Rather than dividing ownership, a trust can be established to hold title of the property and fund an endowment to handle maintenance expenses. Moreover, you can set up a limited liability company to hold the endowment within the trust to avoid paying custodial fees on it.
As soon as the LLC is registered in the state where the lake cabin is situated and the trust is created, it is time to draw up a legal operating agreement that nails down when the property title and endowment would be transferred into the trust, most often upon the death of the current owner.
The operating agreement would also specify how the property is to be used, and grant each member of the next generation the right to equal access to the property. This is often advantageous compared to granting equal shares in a property, since it prevents any one shareholder from cashing out his or her share and jeopardizing the use of the property by generations to come.
As noted within the WSJ article, it is typically preferable to have succeeding generations designate a property manager from within the family to make the key administrative decisions and coordinate the use of the property so it is shared equitably.
To preserve your beloved lake cabin for many generations to come, using a trust is the best guarantee. And just as importantly, it will preserve the family harmony that the cabin has played such a key role in developing.
To learn more about this, go to our cabin planning website, and take the time to work through The Minnesota Cabin Planning Guide and Workbook.
If you would like some guidance on establishing a cabin trust, call our office today at (612) 206-3701 or fill out our contact form to schedule a time for us to sit down and talk.
Image courtesy of Phiseksit/FreeDigitalPhotos.net