The Michigan General Property Tax Act (the Act) requires real property in Michigan be assessed yearly and taxed at one-half (1/2) of its true cash value (true cash value is the same as market value). However, with the passage of the Headlee Amendment to the Michigan Constitution in 1994, limitations were placed on how much assessments and taxes could go up each year. Since 1994-1995, annual property tax increases have been “capped” at levels specified in the Act and remain capped until a “transfer of ownership” occurs. Once a transfer of ownership occurs, the property is reassessed at one-half (1/2) of the “true cash value” as of that date and the taxes, in most cases, go up substantially. The property tax is capped at the new, higher amount until the next transfer of ownership takes place (Michigan property tax bills show a “Taxable Value” and a “State Equalized Value.” The Taxable Value is the capped value upon which the property tax is assessed. The State Equalized Value approximates one-half (1/2) of the true cash value/market value of the property. Once the property tax is uncapped, the State Equalized Value and the Taxable Value become the same for the year in which the uncapping occurred and the cap goes back into effect at that amount).

The key term in all of this is “transfer of ownership,” which basically means a conveyance of title to, or a present interest in, real property. However, not all conveyances constitute a transfer of ownership. One such exclusion is for a transfer of ownership between two or more persons that creates or terminates a joint tenancy if
Read the rest of this entry »

Do you entertain in your family cottage or have your children’s friends over to the family cottage for play dates while on vacation? Perhaps you enjoy having family and friends over for summer cookouts in the summer and holiday parties in December on occasion when you are visiting your family cottage. Have you ever thought about what would happen if your brother-in-law severely burnt his hand on the hot grill while trying to help you cook the hamburgers and you knew your grill was not working properly? What about your aunt Helen, who at eighty-six years old insists on wearing four inch heels to your Christmas party and always has the bottomless glass of eggnog in her hand while spinning in circles under the mistletoe waiting for someone to kiss her?

Injuries and legal action are typically not at the forefront of our minds when inviting friends and family over to the family cottage for a few hours of fun and conversation. But when aunt Helen breaks an ankle, or worse a hip, under the mistletoe and she blames it on your freshly polished wood floor, you will wish you had used some forethought before inviting the family and friends over to the family cottage for a party. Even if we lived reclusively, there is the possibility that someone could stumble on an uneven sidewalk paver or slip on a patch of loose gravel in the driveway while trying to deliver a package. Unavoidable accidents happen, but you should know your liability if someone is physically injured while on your cottage property and take precautions to guard against them. Although having adequate liability insurance and additional host liability insurance is a smart thing to have, it does not prevent a lawsuit.

Read the rest of this entry »

Why should your cottage be in jeopardy and need saving? Cottage-Law.com expert Dan A. Penning has invaluable strategies to pro-actively plan how to protect your cottage first and secure its future. Why risk an emergency rescue plan when you can plan to avoid the crisis with a cottage succession plan?

The Right Legal Entity for Your Cottage

Circumstances need to be evaluated for each family and cottage property. There are a few special cases where keeping your cottage under direct real estate ownership is the simple solution to a complex situation. Two cottage planning solutions which should be examined, and discussed with your cottage law attorney, are Life Estates and the Ownership Agreement.

Dan Penning examines each aspect of your estate and cottage property including strategies to employ to avoid uncapping cottage property taxes. The advantage you gain using a cottage law expert is knowing you will have created a flexible legal entity to fulfill your hopes and dreams of protecting, preserving and saving your family cottage for use by all future generations.

How We Hold Title to Real Estate Ownership

There are two ways to hold title to real estate:

• directly, or
• indirectly

Direct Ownership
Real Estate Law governs the rights and duties of “direct owners”. The granting of these rights and how real estate laws impose duties on direct owners often surprise cottage owners. It’s real estate law surprises which put the family cottage at risk. Real estate laws of direct ownership do not promote keeping the cottage in the family for multiple generations, and the threat of partition and turmoil always exist.

Read the rest of this entry »

First Steps Cottage Succession Planning

First, ask your child, or children, if they want a share of the cottage. They may not want a share of the family cottage and there could be a variety of reasons. Each should be explored for passing on to them an alternative value of their share of the family cottage.

The best way to protect your family cottage is to move it away from the hazards of “direct ownership” being governed by real estate laws. We recommend moving the family cottage from direct ownership to “indirect ownership” and for a Limited Liability Company which is governed by Entity Laws rather than Real Estate Laws.

Read the rest of this entry »

Every kid should roast a marshmallow by a fire next to the lake, paddle a canoe, catch a fish, dive off a raft, skip stones and and eat an ice cream cone or a freshly made donut from a local food shack which opens every summer for cottage visitors.

Your Cottage Property Could be At Risk
Each summer is a chance to create family memories of good times all over again. You’ve spent a lifetime of summers at the family cottage. Your family memories live there and it’s the only place where laughter replaces ringing phones, the sun is your only clock, and keeping sand out of your shoes and picnic basket is the challenge of the day.

Read the rest of this entry »