You've spent a lifetime of summers at the cottage. Family memories live there and it's the only place where laughter replaces phones, the sun is your clock, and keeping sand out of your shoes is the challenge of the day. Each summer is a chance to create family memories of good times all over again.
It's easy to believe this is how you, your children, and your grandchildren will always spend your summers, at the family cottage by the lake.
But the reality of real estate laws and rhythms of life and death could alter your dreams and goals of harmonious sharing of the family cottage by future generations.
There is a lot to consider when planning the family cottage's future survival. Yes, you could draw up a simple will and leave the family cottage equally to your children, but real estate law surprises put the family cottage at risk.
If there are no specific, and enforceable, instructions about how the cottage co-ownership should be managed you potentially place your valuable family legacy asset in harm's way.
Real estate law does not promote keeping the the family cottage in the family for multiple generations.
How your emotions and sentiments are woven into the family cottage may not match how your children, and their spouses, view the family cottage. A child might not want any part of the cottage because they can't afford it, they live in another state and aren't able to use it, or they simply want to "cash out their inheritance" for its cash value, or worse yet, your child might lose their portion of the cottage during a divorce. All are messy situations without equitable solutions for all your children without a plan.
This is where things could potentially go very wrong.
Our American legal system is based upon common law. Our real estate laws are based upon 600 year old laws which have not changed much over the years.
What could happen next depends on the first paragraph of the deed for the family cottage property.
If you leave your cottage equally to your children in the standard way as "tenants in common", which is the traditional form of real estate ownership, any "tenant in common" (your children become co-owners) could force the sale of the cottage. This is called The Right to Partition.
The principle behind The Right to Partition is based upon English common law that no person can be required to own property. If there is a legal conflict between your children, or the co-owners of the cottage property, a court will order the sale of the cottage property if it cannot be divided in a fair way - easy to do for land, but how do you equally divide a building or a boat or a wooden dock? You can't. The cottage property will be sold and the proceeds from the sale will be equally divided between the co-owners.
In 1993 Michigan created the Michigan Limited Liability Company Act (LLC). Every state has since adopted similar limited liability company statutes. The creation of this Public Act provides the legal framework, through Entity Laws, to change the relationship of owners.
The Cottage Succession Plan The Penning Group attorneys create for you is structured under entity laws governed by the Michigan Limited Liability Company Act to protect and preserve your family cottage for future generations.
Indirect ownership of the family cottage using the correct legal entity also shields and protects the cottage owner from personal liability in the event a person is injured while at the cottage.Click here to read more about Cottage Planning Solutions