Owning a family cottage can undoubtedly create numerous memories for you and your family. Whether it be boating, fishing, hunting, swimming or just time away, these memories are cherished.
Unfortunately for some, a family cottage can also be the source of great conflict and hostility for successive generations. When two parents own the cottage, the chances for disagreement are minimal. However, when the time comes and the cottage is passed to the four children, it is more likely that there will be disagreements. In this example, suddenly, the cottage has four owners instead of two.
When multiple people inherit a cottage, hunting land or other property, they typically take the property as Tenants in Common. This means that each owner has an undivided interest in the whole of the entire property so that even a 1% owner has the same right to occupy the entire property as a 99% owner. Also, a tenant in common can sell, give, or loan her interest to anyone she chooses. Outright ownership by multiple family member is not ideal when the goal is to keep the cottage in the family as a source of happy memories.
Fortunately, with proper planning there are ways to make sure any potential problems are avoided. One way to allow for more harmonious ownership is creating a Family Cottage LLC. A Family Cottage LLC will change the way the property is owned.
First, let me explain briefly some of the relevant background of LLCs. The owners of an LLC are referred to as members. The members can control the governing of an LLC by entering into an operating agreement, with written rules, obligations, restrictions and conflict resolution procedures. LLC members can also appoint a manager of the LLC to centralize decision making and operating control in one person.
A Cottage LLC does not have to be complicated and there are many reasons why it may help:
- An LLC can protect owners from liability
- An LLC Operating Agreement will dictate the capital contribution rules for each member of the Cottage LLC. Meaning each member will be responsible for their share of the expenses.
- An LLC Operating Agreement will define a fair method for dividing up and alternating use of the prime times.
- An LLC will assign responsibilities for management tasks such as cleaning and maintaining the house and the yard.
- When time comes, for one owner to sell or transfer her/his shares, a Cottage LLC allows for flexibility and minimizes the risk of a forced sale.
Ensure the future of your family cottage will continue to be a cherished, harmonious place to create memories, by contacting us to help you create a Cottage LLC today.