Tax-free transfers – gifting – of the family cottage to future generations via a cottage succession plan is a great opportunity for cottage owners to enjoy considerable tax savings while real estate values are suppressed.

U.S. taxpayers are experiencing a “perfect storm” of opportunity to make tax-free transfers (gifts) of assets such as family businesses, real estate and other wealth from one generation to the next. The gift tax was first enacted in 1932 by the federal government. Over the coming months, we all have what may be the best opportunity since 1932 to gift family assets without a gift tax now and to avoid significant estate taxes later.

Two notable exceptions to the gift tax
Some people are not aware that giving away assets to their children or other individuals, such as the family cottage, may create a taxable event. The “gift tax” referenced above applies to anything of value transferred by one individual to another. There are two notable exceptions to the gift tax. One is an “annual exclusion” which is an exception that allows individuals to gift up to $13,000.00 per year per person without any gift tax consequences. A second exception is an overall gift tax exemption which historically has been limited to $1M during an individual’s lifetime.

The above-referenced “perfect storm” of opportunity for family cottage owners is almost certainly short-term in nature. Several key elements have transpired to create this opportunity as follows:

• At the conclusion of 2010, Congress changed the estate tax exemption which allows for transfers of gifts up to $5M per individual ($10M per married couple) of assets with no federal gift tax.
• Asset values, particularly for real estate including the family cottage, are still significantly depressed resulting in a greater opportunity to gift value from one generation to the other. In the state of Michigan, a recent Supreme Court decision also provides a unique opportunity for parents to gift ownership of real estate to their children in such a way that a transfer can avoid a significant increase in future real estate taxes.
• Certain widely accepted techniques used by experienced estate planning attorneys may also result in individuals transferring 10 to 20 times the $5M or $10M gift tax exemption limit without incurring gift taxes based on certain “leveraging techniques”. Although these techniques can be complex, they are well established and have withstood attacks in the past by the IRS.
• Most transfers that are made to take advantage of the gift tax exemption also provide significant asset protection for the assets.
• Many of our Cottage Law clients with family cottages will be able to enjoy long-term tax savings as a result of taking advantage of this opportunity to make tax-free transfers (gifts) of these legacy assets. Visit the Cottage-Law website at www.Cottage-Law.com for additional information.

An appropriate gifting strategy for the family cottage can save significant taxes
Why act now to create a cottage succession plan? Unless Congress and President Obama take further action to create a new law, the 2010 Tax Act will automatically expire at the end of 2012 (approximately 13 months from now). The current lifetime gift tax exclusion of $5M per person will drop to $1M. The window of opportunity for gifting significant assets from one generation to the next to avoid potential future estate tax is narrowing. Gifting assets removes the asset’s value in the transferors estate for estate tax purposes. As a result, an appropriate gifting strategy for the family cottage can save significant taxes.

Reducing future tax burdens
It is a widely accepted belief among financial advisors and other financial experts that taxpayers should transfer assets that are depressed in value that may be subject to future estate tax liability as soon as possible. As these assets, including the family cottage, begin to recover and grow in value in the future, so do an individual’s current and future tax burdens.

The possible benefits
Whether you perceive yourself as wealthy or not, given the possible benefits of making gifts of assets and the unique opportunity that currently exists to do so, everyone should at least evaluate their potential future estate tax liability and how current gifts of assets may reduce that liability.

Please contact me if you would like to evaluate your own situation to determine whether gifting assets at this time is right for you.

Dan A. Penning

Hope you found the right crowd of fans to gather at your Michigan family cottage to watch and enjoy the game. Such rivalry and so much at stake on a day like today.

The high winds and fierce weather in Michigan today are another great reason to be inside at the family cottage with a group of wild and loud fans. I’m sure at the end of the day someone will be totally “blown” away by the final score.

Of course, it’s easy to know who we are supporting by our loud cheering of
“Go Team Go”.

Game day is a big day for our family!

Have a great game day at the cottage!

Dan A. Penning

Leelanau Conservancy Annual Picnic and Auction
In Suttons Bay we are supporting and serving as a sponsor of the Leelanau Conservancy’s 2011 Picnic and Auction. The Conservancy’s Annual Picnic and Auction will be held Thursday, August 4, 2011. Over 700 people attended the 2010 auction and over $100,000 was raised to help the Leelanau Conservancy in its mission to conserve the land, water and scenic character of Leelanau County. If your schedule permits, attend the picnic, donate an item, make a bid online or in person and volunteer to make this annual event a success.

I have discussed with several clients the many possible benefits, including very favorable tax savings, of utilizing The Leelanau Conservancy as a charitable beneficiary or partner in protecting property, including legacy property such as family farms and cottages, through conservation easements.

Call Carolyn Faught at 231.256.9665 or visit the Leelanau Conservancy’s website at www.theconservancy.com for tickets to support this event!

Suttons Bay Fireworks Display and Celebration
Another important community event we sponsor, along with Hansen Foods and Bahle’s of Suttons Bay, is the Suttons Bay Annual Fireworks Display and Celebration held during Labor Day weekend. It’s a way for us to give something back to the families of the local community at the close of the summer season. Held at dusk at the Suttons Bay Marina Park. Grab a blanket and pack a picnic basket full of snacks and beverages and join us after sunset to enjoy the fireworks display as it lights up the night sky over Suttons Bay. It’s a fun night for all who attend.

None of these events would be possible without the tireless efforts of community leaders and countless volunteers. We share our heartfelt thanks with our many friends and neighbors who work hard to celebrate and strengthen our communities. Whether in Farmington or in Suttons Bay, we look forward to seeing you “downtown” and “down by the bay.”

Dan A. Penning

Michigan Governor Rick Snyder called the consideration of his proposed Executive Budget a “defining moment” for the state this week as the Executive Budget was submitted to state legislators for the 2011-2012 fiscal year. Snyder commented on his budget as an opportunity to “stop living in the past and start looking to the future.”

As expected, the lynch pins of Snyder’s plan call for the reduction of business taxes by in excess of 1.8 billion and a significant reduction in spending on public schools, universities, local governments and prisons. If passed, the plan will have an immediate impact on the state’s businesses by providing a replacement of the existing Michigan Business Tax with a 6% flat tax on corporate income with some exemptions for designated small businesses. Other parts of the proposed Executive Budget call for an elimination of various business tax credits and replacing the credits with grants from the Michigan Development Corporation.

The Executive Budget also provides for maintaining the already scheduled reduction in the state’s individual income tax rate from 4.35% to 4.25% which is set to go into effect October 1, 2011. Further scheduled reductions to the individual tax rate would be eliminated. In addition, the proposal calls for the elimination of many other existing credits, deductions and exemptions.

While the proposed Executive Budget is far from being a reality and enacted into law, the stage has been set for the debate of how the new administration in Michigan will seek to solve the state’s economic difficulties.

Please stay tuned for more updates on these matters as the debate and ultimate actions to be taken unfold.

Dan Penning

We became owners of a fluffy 20 pound orange and white barn cat name Spike. Spike lives in The Depot- the northern Michigan offices of The Penning Group, and formerly the law offices of Stuart J. Hollander, attorney author of “Saving the Family Cottage – A Guide to Succession Planning for your Cottages, Cabin, Camp or Vacation Home.”

Spike loves to wander around the office and visit the desk of cottage law attorney Dan Penning. He tries to grab a snack of a muffin and just sprawl on Dan’s desk top. He loves to lounge underneath the potbellied stove in the cooler winter months. He gets so close that my husband thought he might catch on fire. With all that fur, how could he possibly be anything but cold. He enjoys greeting clients when they come in and he truly does like to ‘meow’ to say hello. Spike wags his tail out of love. He struts around like he owns the place. I wonder if he isn’t part Ragdoll?

They are the largest breed of cat weighing between ten to fifteen pounds. Did you know that a cat will almost never “meow” at another cat? This is only reserved for humans. Sociable cats will follow your from room to room. They like to check in with you, and monitor your activities throughout the day. The more cats are spoken to, they will speak to you. That definitely is Spike. I can hear him talking when I am on the phone with Dan or Karen, his secretary.

Cats are the sleepiest of all mammals. They spend 16 hours of their day sleeping! Think about this, a seven-year-old cat has only been awake for two years of his life! 95% of all cat owners admit they talk to their cats. I admit I do and my teens and their friends think I am strange.

There are tremendous benefits of owning a cat. They love unconditionally and definitely do not require the care of a dog. They are independent and they use a litter box. They are a perfect pet for a family and if you are a single person. The companionship you have with your cat helps reduce isolation- there is someone to come home to if you live alone. Cats decrease blood pressure and can lower cholesterol. It is also stated that another benefit of owning a cat is that it reduces the mortality rate of heart disease. Owning a feline friend may provide you with fewer visits to the doctor and other minor health problems. It must be why we own three cottage cats. Each one very different from the rest. They are all males- we found them in our family to be the most social. However we have one cat who thinks he is a dog- interesting concept.

Spike became a LOL moment yesterday at The Depot! I am wondering if his ears are twitching in delight as I describe the episode and excitement that took place. There was a mouse who wandered in from the cold and was just making the rounds in the office. Now majestic Spike took one look at the mouse and wandered away. He decided this was really not of any interest to him, and so he went over to the stove and took a long nap. Dan, bewildered by this, thought and said to Karen, “I thought Spike was a mouser.” Karen chuckled, “No, Spike doesn’t do that.” The LOL time came when Karen and Heather, another Penning Group cottage law attorney were chasing this mouse around with a cup. Spike just laid there- all in a day’s work for him. These two ran around the offices chasing this mouse. Oh boy! The mouse was eventually caught and peace was restored to The Depot. And all along Dan thought that Stuart had owned Spike for his expertise at keeping mice out of The Depot. I really had to LOL because it must have been so funny watching Karen and Heather try to catch that mouse. They didn’t probably didn’t see the humor. I decided to investigate after that experience on what makes a good mouser.

Spike I am afraid does not qualify. He just isn’t interested. Cats that have spent a lot of time outdoors are better at hunting than cats that spend time indoors. It also can be difficult to find a good “mouser.” Besides you never know how a cat will react until they encounter a mouse. Spike is definately not interested – and he likes being lazy. He has everything he needs- food, water, and plenty of love. Spike is just not a hunter. I am not sure if he is a bug catcher. Our one cottage cat can see a bug on a wall at a very great distance. He goes crazy, until I get rid of it. Sorry all you bug lovers! I discovered that hunting mice is something that is learned from the mother cat. A house cat or Depot cat doesn’t really get that training because food is plentiful in a bowl, and some have been separated from their mother early on. All I can picture is Morris the Cat with a crown on his head, and a pillow for a bed and food! The richest cat in the Guinness Book of World Records is a pair of cats who inherited $415,000 in the early ’60’s. The richest cat, is a single white alley cat who inherited $250,000. Wow! That would buy you a lot of catnip for your cat!

Well Spike, I think you are splendid! You don’t have to be a mouser to please me. Mice have germs. I guess The Depot will have to in the mean time put out some traps. Maybe the mouse who came in for a visit and to get warm, will inform all the other mice that Spike is big and grand and not to enter The Depot!

Dori

The first being direction.
75% believed that organization and direction in the workplace was a key factor to the work place. They approved of the strong values and ethics.

71% liked the execution of their workplace- meaning they feel their organization is doing things efficiently and well.

70% felt genuinely appreciated at the workplace.

70% believed they were confident in their career and future with this organization.

60% believed in confidence of their managers and the ability of good communication at the work place.

48% stated that the pay is fair for the work to be done. They also felt that the benefit package was better in comparison to others in the work field.

Tom Walsh states that “employees with a common goal overachieve.” “People are happiest when pushing themselves hard -and being challenged by bosses and coworkers to push even harder.”

Every workplace has stress- even the family cottage! The best workplaces know how to take that stress and channel it into positive energy. One very profound statement that Walsh makes is “When workers are focused on a clearly understood mission, they bust their chops happily.” Workers thrive on challenges- it keeps them motivated and they feel connected to a workplace that they feel valued.

At Quicken, the online mortgage firm, they are inspired to be a leader in their area of work and in the company. They also are encouraged to make changes and improve the company. You see they are challenged into leaving the workplace a better place than when they entered in.

My motto at the family cottage- try to make the room you entered a better place than how you found it. This includes attitude, spirit, enthusiasm, and creating an atmosphere of team work. A little tidying along the way makes a difference. If anything goes wrong be part of the solution and not the problem. Work as a team. Put forth quality effort. Top employers focus on staff satisfaction. Employees like to be treated with respect and that everyone is an equal.

Danile Pink, in his popular 2009 book “Drive: The Surprising Truth About What Motivates Us” states while pay is important and can be motivating that “People do better when they understand how their effort contributes to the larger goal.” They want strong leaders who do things ethically and are taking the company in the right direction.

“People like to feel valued for what they do.” Joe Richert, CEO and co-owner of Romulus-based Special Tree Rehabilitation Systems. The top workplaces take the time to do the little things that make a difference and mean a lot to their employees even in these challenging times in Michigan. Richert says “There is nothing magic about being a good employer. You have to work on it every day.”

I spoke with our neighbor today, who has worked at the same company for 20 years. He attended U of M Dearborn in the business program. This is where our son Tucker attends. He works for Plante & Moran, which was given the top special award in Leadership. Yes Michiganders can be positive about their workplace. In other states where Workplace Dynamics conducted similar surveys Michigan employees were more upbeat than other work markets. These included Boston, Cleveland, Dallas, Delaware, Minneapolis, San Antonio and San Jose, California. Houston is the only city that was more positive in the workplace.

Don’t let this be a surprise to you because many Michigan employers know that treating workers right is the right thing to do- it is good business sense. I want to salute all you employers who make a difference to your employees at the work place! This stems from good leadership and a positive attitude to make a difference in your company and to make the world a better place. The Penning Group is that place where employees matter and it shows in their dedication with their clients and community. They keep you informed in the KNOW and offer plenty of ways to keep your family cottage intact.

They are a motivated law firm that takes performance and ethics to a new level. Kudos! Visit their website at www.PenningGroup.com and Cottage-Law.com. You will be very satisfied with their organization and confident in the work they do for you.

Dori Penning

One of the most popular questions and points of confusion is how a soft looking and fuzzy haired yellow cat acquired the name “Spike.” A consistent mindset is because of The Depot being connected to the railroad, and hence “Spike” because of railroad spikes.

The mystery has been solved somewhat and it had less to do with the railroad than it did with how Spike looks.

Part of the reason Spike was named Spike is because of The Depot and the other part is that when Spike was a kitten, Stuart & Rose would walk their sheepdog in the morning and stop in to The Depot on the way back to check on things. Their sheepdog would lick Spike up and down and, with his long fur, it would stand straight up all over the place and look like spikes.

I wonder if that’s how the hair gel industry got its start!

Remember that people won’t remember what you say they will remember what you do. If you belong to the circle of kindness you don’t run around with a badge or a sign saying, “Look what I did for so and so”. You just do your thoughtful gesture because you want to.

Have you ever helped someone find something and feel like you have made their whole world a better place? My oldest son Tucker and a group of friends helped bring a stray dog back to its rightful owner. When the dog was given back to them the faces of the little boy and girl lit right up. They were so happy to get their dog back. These teens truly belong to the circle of kindness.

Sometimes a simple act of kindness can jump start your whole day. I have witnessed the circle of kindness in my own life when someone holds a door open for you. A simple easy little thing but it makes you feel important and special. When someone says a kind word or lets you cut in line at a busy drive through it gives you a lift and then you believe there are some pretty nice people out there.

I have also seen someone they don’t even know buy a person’s cup of coffee at the local coffee shop. My whole impression of this is, “Wow, it is the perfect little way to make someone’s day start out right.”

You can belong to the circle of kindness just by giving a smile and a friendly hello. It is a nice way to make the day better for someone else, and yours too!

You never know when you’re going to make a difference. My husband just made a real impression on me with an act of kindness today. He helped a friend today by picking him up from Munson Hospital in Traverse City, Michigan. It was kind of a scary two days for his friend. He under went stint surgery for his heart. This friend, Terry, never asked my husband to play nurse-maid after his procedure, or become his main support person to care for him. It was my husband’s kindness and friendship for this friend that made him do it. This heartwarming kindness is truly admirable and belongs at the top of the circle of kindness. Get well soon Terry! Smiling at this thoughtfulness, “this will be the best medicine of all.”

So when you are out and about in this sometimes crazy and mixed up world, please take time to belong to the circle of kindness because you will not only make a difference for that person or persons, it will do you good and your soul will be lifted. Your gesture of goodwill will be truly rewarded.

Dori Penning

Visit Cottage-Law.com for all of your cottage succession planning needs and for learning about saving the family cottage. Keep that good will and circle of kindness going for you and your family and friends.

Ice cream and summer at the family cottage goes hand and hand. There is nothing more relaxing than sitting with a generous scoop of your favorite ice cream at the family cottage on the lake. There are many flavors of this delicious dessert. I believe House of Flavors known to many as Baskin & Robbins has 64 kinds of flavored ice cream.

Now it is not to say you can’t have ice cream at different times of year but there is something special about sharing ice cream in your favorite bowl or in a cone of choice- it may be a waffle or sugar or the infamous kiddie cone- at the family cottage.

Summer and ice cream is a right of passage into heavenly bliss. Ice cream raises your serotonin levels which gives you an instant happy-mood boost. Maybe my teens, who can have their moody moments, need a serving for breakfast, lunch, and dinner. I wonder if anyone thought about putting ice cream in a spray bottle as teen cologne or perfume for the ladies. Probably not the same thing as eating it.

I discovered that ice cream says a lot about family members/friends at the family cottage. If you are an ice cream connoisseur, I will humor you with my findings. Just beware that the number one flavor is vanilla, followed by chocolate, and then strawberry.

If you love vanilla ice cream you are a confident person.
You love that predictable safe flavor. It goes with everything from pie to berries or a cookie or two. Vanilla people do like taking risks and do not apologize for their likes and dislikes.

Strawberry people are very generous.
They love to help others and devote most of their time volunteering and supporting others. These strawberry lovers are very community minded. Now the chocolate lovers are stress proof and go with the flow. They don’t sweat the small stuff.

Chocolate is named by some Doctors as nature’s Prozac.
Chocolate lovers are usually happy and outgoing. They love every spoonful or bite of this delicious indulgence.

If you enjoy Butter Pecan ice cream at the cottage, you tend to have a perfectionist personality. You have a nutty side for your creativity and a sensitive side for the ice creamy part. You have great work ethics at the work place but you are harder on yourself than you need to be.

Coffee ice cream lovers live in the here and now.
They take hold of every moment. They are very spontaneous, but they also enjoy the robust coffee flavor this ice cream has to offer. The finer things in life.

Rocky Road ice cream lovers are multi-taskers with their charm and charisma.
People are drawn to their personality. They are incredibly social. A Rocky Road ice cream lover has many interesting and captivating sides.

A mint chocolate chip lover is strongly opinionated.
You are the one person people want in their corner for support. Mint actually makes you more alert and awake. This gives you the ability to think on the spot.

If you don’t fit any of these ice cream personalities you may be thinking who comes up with this stuff anyway. You can blame all the survey people out there on the internet and in the marketing world. I am sure there is something out there about what your favorite cookie says about your personality.

Enjoy your ice cream any way you like it at the family cottage.

Dori Penning

The best memories at the family cottage are the incredible family stories, whether you believe them or not. We vacationed at the “big lake” as my kids used to call Lake Michigan. My husband and I had a wonderful bonfire with our boys and family friends who stayed with us at the cottage on Good Harbor Bay. We all went to bed after saying our goodnight’s, but Dan decided to stay at the water’s edge with our yellow labs Bailey and Callie.

He wasn’t there very long when one of the dogs, Bailey, started to growl. Now you need to understand you can’t see your hand in front of you when the lights are out. It is pitch black and for me it is a little scary. Dan grabbed a large stick and a flashlight and crept slowly with the dogs back to the cottage. There were a lot of rumors of cougar sightings at Good Harbor Bay. We may never know what scared and startled those dogs, but my husband quickly, and I mean quickly, got out of there.

Well, what do you believe? Was it a coyote, a bobcat or a bear? It was not a time to find out. The next morning we never did find any animal tracks to prove my husband’s case, but if you ever visit this family cottage in northern Michigan you might come across all kinds of wildlife. Be prepared.

We have seen a sign at Pyramid Point (the most beautiful place in the whole wide world to me) that tells you how to distract and back away from a cougar. The first step is to back away slowly, and have large sticks and clap them together. It also tells you to pick up rocks and bang them together and then throw them. Now if I hike up this beautiful trail and I see a cougar I’m not sure I would have sticks and rocks in my pant pocket. I definitely do not, and I repeat do not, want to see a cougar up close. I wonder who put that sign there?

Wildlife is very interesting to me. So whatever you believe, enjoy the family cottage and KEEP THE BRIGHT LIGHTS ON IN THE DARK! For all of your fond family cottage memories or tales visit Cottage-Law.com “The Home of Cottage Law” to keep the magic and friendly faces of family and friends alive at the family cottage.

Dori Penning