Mark Kellogg is a Lansing attorney specializing in cottage law and property succession planning. He explained the importance of having a cottage succession plan.
A major concern with respect to property succession planning is keeping property taxes "capped" at the property's "taxable value." This is the situation until there is a "transfer of ownership"--which is not as obvious as one might think. For example, a transfer of ownership does not include a transfer to a "qualified family member."
Avoiding the uncapping of property taxes is just one of the reasons for developing a cottage plan. For the "founders" of the property the primary goal is to keep the property in the family for generations to come. The heirs' concerns include protecting the cottage from a divorce and developing a fair scheduling system. A typical cottage plan would cover:
- Who should own it?
- Who should manage it?
- Who should pay for it?
- What if an owner wants/needs out?
- Who gets to use it?
- How should use be scheduled?
One type of cottage plan is an agreement between tenants in common. Mark says it is better to avoid a tenancy in common and go with either a limited liablility company or a trust. There is no single "right" solution for every family. Mark says don't strive for perfection, but remember that a reasonable plan is better than no plan at all.
Mark's PowerPoint presentation can be found here.