The Cabin Act is specific to the unique requirements of family cabins, vacation properties, hunting lodges, or other types of shared ownership. Cottage Law is a fairly new area of ​​legal practice. It gained momentum in the early 1990s when states created Public Laws that provide the essential legal framework to change the ownership relationship of cottage owners. Michigan lawmakers created the “Michigan Limited Liability Company Law” (LLC) in 1993, and since then, most states have adopted similar limited liability company statutes. Cottage Law is a law firm practice area that focuses on family home exchanges and cottage estate planning.

Cabin Estate Planning it involves developing a succession plan to pass the family home on to children and future generations for their shared use and enjoyment. An estate plan is designed to protect the owner, family members, and ownership of the cabin from the threats of a forced partition lawsuit and to establish equitable rules for future operation, sharing, financing and the management of the family cabin.

7 key concerns related to the cabin addressed by a cabin succession plan:

• The possibility that the ownership of a part of the house passes into the hands of a non-family member as a result of death or divorce.
• What to do if a family member is unable or unwilling to meet some or all of the financial commitments to the cabin.
• The financial impact on the cabin if a family owner files for bankruptcy, or if a portion of the cabin interest is leveraged by a family member’s creditor.
• How to resolve internal conflicts between family members about how the cabin is operated, maintained and improved.
• A family member wants to “withdraw” his interest in the family country house.
• Disharmony and even possible litigation between siblings when the parents are no longer present to mediate a peaceful resolution.
• What happens when a child or children can’t afford to keep the cottage?

In the past, most parents relied on their estate plan to leave the family farmhouse equally to their children. While this is a way to convey ownership of the family farmhouse and transfer ownership to others, it presents financial, legal, and emotional risks to both the heirs and the family farmhouse. An estate plan can’t prevent a partition lawsuit, set rules for the future of the property, or enforce your dreams of keeping the farmhouse in the family. In Michigan, any time you transfer title to a property, you risk “uncapping” the property’s assessed value and will likely experience a drastic increase in property taxes on your farmhouse.

There are many reasons why it’s hard to share and pass on family cottages, but it doesn’t have to be hard for you. The right information and a “just for your family” cabin succession plan can eliminate the risk and confusion that most families experience. Now is the time to start looking at your family farmhouse property from a different perspective.

How do you own real estate?

There are two ways to have the property title of a real estate:
-directly, or
-indirectly

direct ownership
The Real Estate Law governs the rights and duties of “direct owners”. The granting of these rights and how the real estate laws impose duties on the direct owners often surprises the owners of country houses. It is the surprises of the real estate law that put the family home at risk. Direct ownership real estate laws do not promote keeping the country house in the family for several generations, and there is always the threat of division and confusion among co-owners.

indirect ownership
The Entity Law, which are the Laws of Trusts, Partnerships, Corporations and Limited Liability Companies, govern the rights and duties of “indirect owners”. The Entity Law is extremely flexible and adapts to the complex realities of commerce.

One of the first things to learn is how you hold title to your country home. He reviews the first paragraph of writing. If it says “Tenants in Common”, you and other co-owners are “direct owners” and your cabin is always at risk. Any co-owner could force the sale of the family home by using their right to file a “Right of Partition” lawsuit.

Family cabins are generally governed by 600-year-old real estate laws. The American legal system is based on English common law and the principle behind the “right to partition” is that no person can be required to own property. Think about that for a minute. If you plan to pass the family farmhouse on to your children as “tenants in common” as well, and one of your children prefers to have the “cash value” of your inheritance and instead of a portion of the family farmhouse, you may choose to end his relationship with his co-owners of the country house. If siblings cannot afford to “buy out” a sibling and there is no way the cabin property can be divided equally, a court could order the sale of the property and divide the proceeds equally between the co-owners. His dream of happy family times in the country house for future generations is lost.

To protect the family farmhouse for future generations, change the ownership relationship from “direct owners” to “indirect owners” by creating a farmhouse limited liability company (LLC). The LLC is governed by flexible Entity Laws that have provisions for multiple owners and generations of family ownership, versus Real Estate Laws that favor the rights of the individual real estate owner.

Indirect ownership of your cottage through an LLC allows you to use laws intended for business entities. You can customize an arrangement specifically for your family’s wishes. You are in control. You can decide how the family farmhouse will be operated and financed, and more importantly, you are in control of how the farmhouse will pass from one generation to the next.

When you create a Cabin Limited Liability Company, you transfer title to the cabin to your Cabin Limited Liability Company. The LLC becomes the new owner of the farmhouse, furniture, boats, vehicles, and other equipment. You and future generations of your family become “indirect owners” of the cabin. Instead of a “direct ownership” interest in the cabin real estate, you own “membership units” in the cabin LLC and can then transfer “membership interests” in the newly created cabin Limited Liability Company. made to his heirs.

Work with an experienced farmhouse law attorney to review your family farmhouse ownership in its entirety. A rural law attorney is in a position to advise you on short- and long-term legal strategies and structures to prevent your property from being “discovered,” property tax appeals, and related tax matters.

A cabin law attorney works with the family to develop a plan for cabin management, addressing cabin use scheduling, how to equitably resolve sibling power struggles for use during peak season months, how to finance and possibly equip the farmhouse and develop a financial plan for a “fancy getaway” to accommodate a sibling who does not want to share the use, care and expenses of the family farmhouse.

The core of the Cottage Succession Plan and LLC is the Cottage Operating Agreement, which sets out rules for the management, sharing, and future of the cottage. Care must be taken to accommodate the wishes of each owner because each owner must be willing to sign the operating agreement once it is drafted.

You will need to choose between two types of LLCs based on when you plan to implement the LLC. One is “Immediate Cottage LLC,” which becomes effective when cottage owners finalize their operating agreement, file articles of organization with their estate, and sign a deed. The other is a “Springing Cottage LLC” which allows the cottage owner to maintain full control for the life of the cottage and takes effect only upon the death of the cottage owner. The Cottage Operating Agreement drafting process is different for each type of LLC, but the goals of the agreement are the same. Your rural law attorney will advise you on the procedures for both types of LLCs.

The Cabin Operating Agreement determines everything about the cabin including, but not limited to:

• Contributions to Expenses
• Who can own
• Rental
• Maintenance
• scheduled use
• annual budget
• capital improvements
• Operating Agreement Modifications
• Amendments to the Company’s Articles of Association
• merging the company
• Dissolution of the company
• Establishment of a cabin use fee for members
• Select or replace company managers
• Mortgage the cabin
• rent the cabin
• Change the company to a different legal form
• Endowment contribution
• Modify the operating agreement
• approve construction
• Approve remodeling that alters the character of the cabin.
• Increased members’ share of property insurance, property taxes, and standard living expenses
• selling the company
• I sell the cabin

Circumstances must be evaluated for each family and cabin property. The advantage you gain from using an experienced farmhouse law attorney is knowing that you have created a flexible legal entity to fulfill your hopes and dreams of protecting, preserving and saving the family farmhouse for the use of all future generations.

A well-designed cabin ownership plan preserves the “experience” of the family cabin. All the memories that the experience produces are worth more than money and can give you what you hoped for: a common and loving bond and a closer relationship between grandchildren and great-grandchildren.

Begin the process of creating your cabin plan. Having a simple plan in place, that you can easily change and update, is better than the consequence of not having a protective farmhouse estate plan for your heirs.