Passing the Family Cabin and Preserving Family Harmony

Summer is here! For many Minnesotans summer means fun in the sun (and sometimes rain) at the family cabin. More than just a place to relax or recreate, the cabin is often also a repository of family tradition and memories. Unfortunately, the cabin can also become a source of family conflict when it is time to transition ownership of the cabin from the parents to the next generation. It is often said that "failing to plan is planning to fail" and that is especially true when trying to pass the cabin to the next generation.

The transfer of the cabin to children is a complex transaction. Many questions must be asked and many issues must be resolved to successfully complete the cabin transfer within a family.

Should the cabin be sold, gifted or passed at death and what are the income, gift and estate tax considerations associated with the method of transfer?

Do all of the children want to become owners of the cabin? Perhaps the cabin is no longer convenient for all family members to use. Maybe some family members lack the financial resources to contribute their share of the cabin expenses. Some people prefer to devote their spare time to travel instead of a communally owned family retreat.

If some, but not all, of the next generation are interested in keeping the cabin in the family, what type of estate equalization, if any, is appropriate to maintain family harmony?

What legal structure will best achieve your goals? Shared ownership among the children is an invitation to family disharmony without a well-planned structure to avoid or resolve conflict. Co-owner agreements, Cabin Trusts and Limited Liability Corporations all seek to anticipate potential disputes and provide dispute resolution structures.

I have heard many reasons for not being proactive about cabin succession planning, but I have not heard any good ones. I believe the worst reason for not addressing the cabin succession issue is "Our children all get along, they will work it out". That may be true, or it may not. Sometimes when the parents are gone, emotions take over and the children once again act like children. Things are said and done that would never be said or done in front of a parent and families can be torn apart. It is especially heart breaking when the children actually have all got along until the failure to plan the cabin succession splits a family.

A family owned cabin can be a tremendous legacy and can keep families unified. With intention and proper planning, the cabin can remain a place of joy for all involved.

Contact Attorney Greg Van Heest at the Gries Lenhardt Allen law firm at (763) 497-3099 to discuss your options for successful cabin planning.

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