


Many business owners form several types of business entities to hold their assets and operate different aspects of their businesses. A common strategy is to form limited liability companies to hold real estate. The operating entity, such as a manufacturing entity, pays monthly rent to the real estate LLC and this can work to keep liability of the operating entity separate from the real estate LLC. Some LLCs are formed to hold other assets, such as personal property that is leased to the operating entity. Also, LLCs are commonly used to manage family-owned assets and facilitate transfers among family members. LLCs are not required to have the formalities of meetings, minutes, and notices which are required for corporations. However, for an LLC to maintain its liability protections and protect itself from IRS attacks, it is prudent to exercise some formalities to evidence that the LLC is maintained as a separate entity and is not the alter ego of its owner(s). We advise many of our Cottage Law clients and business owners and families who use LLCs to hold and manage assets that they should treat the LLC as a business by following the pointers below.
Going, Going, Gone!
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.
Michigan Cottage Law definitely gains new perspective on game day in Michigan!
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.
Every time I watch an English movie or see a program set in England I can’t help but notice beautiful English country estates. As an attorney I look at the lavish estates and think about the right to partition and how our real estate laws are based on 600 year old laws. What does this have to do with your family cottage? Plenty. Our current real estate laws put your family cottage at risk. Why? Simply because real estate law does not promote keeping the family cottage in the family for multiple generations. It involves how the cottage is owned. Direct ownership and indirect ownership is what makes the difference. Cottage Succession Planning provides a solution to someone being able to invoke a Right to Partition. Read more about family cottage risks on our website at http://www.cottage-law.com/cottage-risks.html
Dan A. Penning
It doesn’t matter what time of day you arrive, everything always looks the same. Granted, the trees are taller and wildflowers seem to be growing everywhere. But your family cottage is the same to you today as it’s always been.
Cubby holes filled with trinkets and treasures
While waving hello to neighboring friends you realize every family cottage and summer home is as different as the memories gathered by families every summer. Each cottage has a special cubby hole filled with trinkets and treasures from sandy beaches and hiking adventures through surrounding woods. Weathered hinges guarantee screen doors will squeak open and slam shut right on cue announcing that this is summer. It’s easy to get caught up in the moment of racing down to the lake and assuming every summer will be just like the last.
Succession Planning for Vacation Property
Steps for Cottage Sharing
With summer here, many families will be enjoying their family cottages during the span of summer’s endless sunshine defining the lazy days of summer at the family cottage.
This is how summers have always been. You enjoy the laughter of denials and finger-pointing about who created the latest mysterious heap of sandy wet towels on the cottage porch floor. The children stand shivering from their latest dip in the lake and you silently wager bets against how long it will take for the lake water drops hanging from ends of clumped wet bangs to land on the table.
If your family cottage property is adjacent to a lake with public roads, this information may be useful to aid you in determining the legal rights the public has to access the surface of the water next to your family cottage.
Water access points along Michigan’s inland lakes
As families begin contemplating vacations up north or weekend getaways to one of Michigan’s many inland lakes, water access points deserve careful consideration as they have become sources of lawsuits regarding the public’s right to access the surface of the water from public roads adjacent to the water. Many of these lakes are bordered by subdivisions that were platted decades ago and depending on the language in the plat and the type of public roads, whether perpendicular or lateral to the lake, will determine whether the surface of the water can be accessed by the public by means of the platted streets.
Most people would think “economic value” is the most important factor to protect the family cottage. Common “emotional value” has proven time and time again as the most important motivation behind developing a cottage succession plan to protect the family cottage.
Yes, it’s true when they say, “beauty is in the eye of the beholder,” and it’s especially true when thinking of the family cottage. Whether the family cottage is a family retreat in some stunning mountain region, or a luxurious custom built retirement home on one of the Great Lakes touching Michigan, Illinois, Wisconsin, New York, Ohio, Indiana or even Canada, or a small rustic cabin on a pristine lake or stream, it’s not “economic value” that is the most important factor to protect the family cottage, it’s the “emotional value.”
The Practical Effect of Michigan Supreme Court’s Decision in the case of Klooster v City of Charlevoix
The Supreme Court’s decision in the Klooster case provides that certain types of joint ownership of real estate in Michigan can prevent property taxes increasing at the time of a joint owner’s death. While the decision is generally favorable to the taxpayer, there are various rules and contingencies that must be satisfied in order to achieve property tax savings.
They say, “beauty is in the eye of the beholder.” That’s especially true when applied to the family cottage. Whether the family cottage is a small rustic cabin on a pristine lake or stream, a luxurious retirement home on one of the Great Lakes or ocean shore, or a family retreat in some stunning mountain region, it’s not “economic value” that is the most important factor in keeping the family cottage, it’s the “emotional value.”
Some would argue that a place is just a place but the people make it special. When it comes to the family cottage, it can be argued “the place” is special, sometimes almost magical, and can transform those who spend time in that place from stressed out, overworked adults back to their carefree days as a child; skipping rocks on the water, swimming off the dock, nursing a sunburn and eating s’mores by the campfire. For most, the family cottage creates a place for memories and traditions to be formed and a safe haven to retreat to for rest, reflection and reminiscing later in life. The family cottage is a constant in an ever-changing world. It’s where experiences can be shared and passed on to the next generation in their purest form.