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.

It’s almost impossible to imagine this won’t be how you, your children and your grandchildren will spend every summer. Although the idea of family cottage sharing seems like a simple process, the reality of real estate laws and rhythms of life and death, along with divorce laws, could prevent your vision of harmonious sharing of the family cottage by future generations from becoming a reality.

The first obstacle facing the future of the family cottage is knowing how your children view their “legal rights” to the family cottage. Some may not be as emotionally attached to the family cottage and due to their own personal circumstances might not want any part of the family cottage. Your children who live in another state might not want any part of the cottage because they don’t use it, or can’t afford it, or they might want to simply “cash out their inheritance.” The risk always exists that they might lose their portion of the cottage during a divorce. These situations, and the right to partition, can be avoided with a solid cottage succession plan, or as some call it, a vacation property succession plan, from The Penning Group.

Cottage Planning Laws

Protect the Family Cottage using Entity Laws

In 1993 Michigan created the Michigan Limited Liability Company Act (LLC). The creation of this Public Act provides the legal framework, through Entity Laws, to change the relationship of owners. Before Michigan created the Michigan Limited Liability Company Act (LLC), many families relied on partnerships, limited partnerships, joint ownership, or co-tenancy as the structure for owning family cottages or other vacation property. Each of these forms of ownership have drawbacks to ownership that can now be addressed with a Michigan LLC because real estate law surprises put the family cottage at risk.

A Cottage Succession Plan
A Cottage Succession Plan created by The Penning Group will be structured under the laws governed by the Michigan Limited Liability Company Act, to keep your current traditions in place while protecting the family cottage for future generations from disagreements, forced ownership changes, family members failing to pay their fair share of ownership costs, etc. Indirect ownership of the family cottage using entity laws also shields and protects the cottage owner from personal liability in the event a person is injured while at the cottage.

Cottage Sharing – It Is Not Easy
Below are seven common cottage-related concerns of those facing “cottage sharing” within their family – concerns which are addressed and resolved within a Cottage Succession Plan created for you by The Penning Group:

• The possibility that ownership of a part of the cottage will pass into the hands of a non-family member as a consequence of death or a divorce.
• What to do if a family member is not able or not willing to meet any or all financial commitments to the cottage.
• The financial impact on the cottage if a family owner files bankruptcy, or a portion of the cottage’s interest is levied by a creditor of a family member.
• How to solve internal conflicts between family member about how the cottage is operated, maintained and improved.
• A family member wants to “cash out” their interest of the family cottage.
• Disharmony and even possible litigation between siblings when parents are no longer around to mediate a peaceful resolution.
• What happens when a child, or children cannot afford to keep the cottage.

Cottage Plan Consultation

You have worked hard to have a special place for your family to go, and we want to help you preserve your investment for future generations. For further assistance in protecting the family cottage, contact me at 231-271-4500 for a free initial consultation to discuss your family cottage and what you already have in place, and whether it will accomplish the future plans you have for your family’s future use and enjoyment of your family cottage or other vacation property.

Have a great summer at the family cottage!

Dan A. Penning