By Charles F. Tucker, Esq.
A camp in New Hampshire, a cottage on Cape Cod, a cabin in the Sierra, is often much beloved by a generation or two of a family. You have had great days there, you know you are not eternal, but you hope, somehow, the camp, cottage, or cabin, will stay in the family for many generations to come.
Lawyers can't guarantee it, but they can help.
Sometimes the problem is one of plenty – your children reproduce, and so do theirs, and the camp, cottage or cabin cannot accommodate them all. We, being lawyers, have ways of rationing the usage, from the very simple – Child A has it from January 1 to July 31, and Child B for the rest of the year, alternating each year, to very complex ways of bidding for weeks, or annual lotteries, for coveted weeks each summer.
And, we can offer different ways of allocating ownership, from a reasonably simple trust to a more complex corporation or limited liability company.
Issues to be resolved include who is to be able to own an interest in the place – just descendants, or widows/widowers of descendants? Can interests be transferred to others, and is the transfer to be restricted to family only?
What is the fraction of the interests needed to mortgage the premises, or to sell it?
What do you do to the interest holder who does not put in his or her share of the money needed for the new roof?
Do you do rentals to non-family members?
Are the property taxes, or maintenance costs becoming prohibitive?
Who keeps the books?
If there is more than one dwelling on the property, or, if another could be built, how do you deal with that?
If there is more than one dwelling unit, does it make sense to condo it?
If there is excess land, does it make sense to sell it to bring in money, or, try to sell a conservation easement so it won't be developed?
Frequently, all the above questions have been answered for this year, but, think ahead to when the older generation is gone, and think about the cast of characters in the next generation – how will they want to deal with this?
It is far better to deal with these issues in advance, and, as noted above, lawyers can help by asking the right questions, and then formulating an organizational structure to get it done.
Transferring a vacation home often involves complex decisions with significant tax considerations. Next month's article will briefly discuss the tax consequences associated with transferring a vacation home at death, or by sale, or by gift.
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