Solve Threats and Surprises Causing Problems For The Family Cottage

May 20

In previous blogs, I addressed various surprises and threats that could materialize as a result of a lack of planning to keep the family cottage in the family. The solution to avoiding the threats and surprises is to transfer ownership of the family cottage from individual(s) to a legal entity.

“Direct” vs “Indirect” Ownership

“Direct ownership” means the cottage is owned/titled in individual(s) name(s). It is this ownership status that can result in the various threats and surprises popping up and causing the cottage to exit the family.

Indirect ownership of the cottage through a trust, partnership, corporation or limited liability company allows owners to escape the historical real estate law doctrines that cause surprises and threats to the cottage. By transferring title to the cottage to a legal entity, business law rules govern the ownership, management, use, financial aspects and transfers of ownership terms and conditions of the cottage.

More Cottage Property Risks

The solution to avoiding threats and surprises as well as providing a proper structure to implement cottage planning is through “indirect ownership”.

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Liability Protection

One key aspect of transferring ownership from individual/direct ownership to a legal entity/indirect ownership is that cottages owned by legal entities limit or protect against an individual’s personal assets being exposed to potential creditors claims resulting from things like accidental injuries suffered on the cottage premises. This can be especially important where the owners of a family cottage rent the property to third parties on an occasional or regular basis which is often done to help pay for annual expenses of the cottage.

Legal Entities

The types of legal entities that commonly are used for cottage planning are trusts, partnerships, corporations and limited liability companies. I will expand and explain the elements of “indirect ownership” as it relates to each type of legal entity in my next blog.