For many Wisconsin families, the cottage is more than a piece of property. This is a special place where life slows down and memories are made. Whether it is the sound of kids splashing in the lake or the quiet mornings on the porch with a cup of coffee, these moments make that family cottage much more than real estate.
Unfortunately, as years go by and the property passes from one generation to the next, keeping the cottage in the family can get difficult.
However, with the right plan, you can protect the property and keep it a place where your family gathers for generations to come. Here are a few tips on how to keep the family cottage in the family in Wisconsin.
You Need to Plan Ahead
Many people might assume that passing the cottage down to their children will be easy. However, when multiple heirs inherit a property together, they have equal rights to use it. That means they can sell or mortgage their share.
Even families with the best intentions can run into trouble if they do not set up some ground rules in advance. By planning, your family can have a roadmap to follow to help keep that family cottage safe and secure.
What Are Your Options for Keeping the Cottage in the Family?
If you don’t want the family cottage to become a source of stress, you need to think ahead. Here are a few steps to take to secure the property’s future.
Set Up an LLC for the Cottage
If you want to keep everything organized, consider forming a limited liability company (LLC) for the cottage. With that, you can transfer ownership to the LLC and give family members “shares” of it. You can use the LLC’s operating agreement to spell out:
- Who can use the property and when.
- How decisions about repairs and improvements will be made.
- How costs for taxes, insurance, and maintenance will be split.
The LLC can also prevent individual family members from selling their shares to outsiders. This is a good way to set expectations and keep everyone on the same page.
Create a Family Trust
Another popular option is placing the cottage into a trust. This choice allows you to designate a trustee to manage the property according to your wishes. There are other benefits of establishing a trust. You can:
- Avoid probate to make the property transfer easier and quicker.
- Set rules for how the cottage is used and maintained.
- Provide for future generations without leaving them a legal mess.
There are several trust types, but many families choose a revocable trust. This provides more flexibility as the needs of the family changes over time. If you are looking for a way to create long-term stability and keep the family cottage future-proofed, a trust is worth considering.
Use a Life Estate or Transfer on Death Deed
Consider a life estate or a transfer-on-death (TOD) deed if you want another approach. These options allow the property to pass directly to your heirs when you pass away. In turn, they can avoid probate.
With a life estate, you keep the right to use the cottage during your lifetime. When you pass, that ownership transfers automatically. On the other hand, a TOD deed allows you to name beneficiaries. They will be able to inherit the property at your death.
These options are simple but don’t offer the same level of control as an LLC or trust.
What About Taxes and Long-Term Planning?
With any piece of property, you have to think about taxes. You don’t want to pass property on to your heirs, only for them to have to deal with a large tax bill. Remember that transferring the cottage during your lifetime could trigger gift taxes. Also, capital gains taxes might apply if the heirs eventually sell the property.
Even Medicaid could be affected. If you transfer the property within a certain timeframe, that could affect your eligibility.
You will want to reach out to an experienced estate planning attorney. They can help you navigate these issues and make the best choices for your family’s situation.
Preserve the Place Where Memories Are Made
A family cottage is more than wood, nails, and shingles; this is a part of your family’s story. With some planning and the right legal guidance, you can ensure it stays in your family and continues to bring everyone together for years to come.
If you’re ready to start planning or want to explore your options, reach out to Collins Law Firm. We can find solutions to keep the family cottage in the family in Wisconsin.Contact us or call (414) 207-6292. Schedule your free and confidential consultation today.