Cottage Succession Planning

Before giving a share of the family cottage to a child a parent should first ask the child if they want a share of the cottage.

When you form a Limited Liability Company (LLC) for your family cottage you create a company which has owners, and they are often referred to as "members of the company".

At the heart of a successful Cottage Succession Plan is "The Operating Agreement" designed to control the use and enjoyment of the family cottage. It provides a structure of rules to manage the operation of the cottage and includes the rights and obligations for each member of your cottage LLC. There are similarities with each operating agreement, but like the diversity of families, each plan is unique to that family's requirements.

The Power of Membership Units

When you think of a "company" it is natural to think in terms of owning a "share" in that company. Even though it is not required, most families issue "Membership Certificates" to the members of the cottage LLC. Having a solid certificate in hand also clarifies the identify of the owner and how many "units" in the company are held by that owner. An LLC can be structured to incorporate the principles of democracy - the members vote on everything so "Units" are important when members are voting on cottage operating and use concerns.

Now or Later?

Immediate LLC and Springing LLC Artwork for Cottage Succession Plan from
Once you've decided to develop a cottage succession plan you will need to decide which type of Limited Liability Company (LLC) to form. This involves timing - when do you want the LLC to become effective. Now or Later?

  • An "Immediate LLC" takes effect "immediately" when you finalize your operating agreement, file articles of organization, and sign the deed.
  • A "Springing LLC" takes effect when the cottage owner dies and is set up through an estate plan.


You can establish and organize your LLC within any state, but most set the company up within the state where they have their permanent residence or within the state where the cottage is located.

Each state has similar Limited Liability Company Laws, but they are not identical. In some states LLC managers have complete control, whereas in other states more power is granted to members of the LLC.

Name Your Company

The name of your LLC has to be unique. States will not accept two LLCs with the same name. If you have decided on a name for your family cottage, and are establishing an "Immediate Cottage LLC" have your cottage law attorney reserve that name with the state where you are organizing your company. This will prevent another person from registering the name you have chosen for your LLC while you are finalizing your operating agreement.

Unfortunately you are not able to reserve a company name for a "Springing Cottage LLC" due to the time span between the drafting of an operating agreement and the owner's death.

Click here to read more about "Drafting a Cottage Operating Agreement"