If you have a cabin, it is likely that you’ve planned family weekends throughout this summer and are about now closing the cabin for the season. But have you put thought into how your cabin fits into your estate plan?

If you have any thoughts about passing the cabin on to the next generation, there are some key areas that need to be addressed: scheduling, expenses, maintenance, succession planning and the ownership structure (for more on this, see the 2015 article we wrote titled “The Family Shared Cabin”) for the next generation.

Today, as another cabin season winds down, here are a few reasons why cabin-owning families should not delay in asking these questions and making these decisions. Too many families lose cabins and splinter when the ownership and use of the cabin is not planned out far into the future.

1. An Ounce of Prevention is Worth a Pound of Cure (and There May Be No Cure if the Cabin is Lost)
It may seem logical to wait, to trust in everybody’s good nature, and assume that future problems will be dealt with and everybody can use the cabin harmoniously. But, the time when everybody is getting along is precisely the time to come to a binding agreement. Unsurprisingly, families don’t always see eye to eye when one child’s divorce or bankruptcy is forcing their siblings to sell their cabin.

Co-ownership of the cabin itself creates grounds for conflict around expenses and use. When Mom and Dad are around, cabin ownership is pretty simple. They want as many kids and grandkids, nieces and nephews, and even dogs to visit as regularly as possible. Often they are the glue holding the family together. When it’s the next generation’s turn to take ownership, the situation turns more complex. Simple co-ownership of the property by a set of siblings without any underlying written agreement subjects the cabin to the petty (and sometimes not petty) squabbles that can arise between or among siblings.

If you want to enjoy your weekend at the cabin, and don’t want your annoying brother to interfere, you’ll be glad when you have the exclusive right to use the cabin that weekend, per the written cabin LLC or cabin trust agreement.

2. Medical Assistance
Long term care costs are becoming a larger motivation for complex estate planning. Families of any net worth can feel the pinch of long term care costs, and demographic trends will likely make costs rise even higher. A cabin is often the prized asset in a family and frequently makes up a large percentage of Mom and Dad’s estate. Failure to plan can subject the cabin to medical assistance liens or even require the sale of the cabin to fund medical care. When the needs of the current generation clash with the wants of the next generation, conflict often ensues.

If the cabin is to be gifted, then the owners need to look far into the future to make sure they are not jeopardizing their eligibility for medical assistance. This is especially true because cabins are frequently gifted in fractional shares to allow the first generation owners to maintain use and control of the property. With proper planning, this ownership and control can be ensured contractually with a lease or a separate category of shares, while still completing a gift of the cabin as early as possible.

Likewise, if the next generation is willing and able, we can help customize the purchase of the cabin in a way that retains the characteristics of a fair market value or arms-length transaction so the sale doesn’t jeopardize the parents’ eligibility. Mom and Dad can use the funds for their care while the cabin stays in the family.

Concluding Thoughts
Whatever your plans are, whatever your family wants to do in the future, the pertinent questions about cabin ownership should be asked and answered sooner rather than later. Whenever you have your next family gathering at the cabin (hopefully there might still be some this fall), sit down and start the discussion on the future of the cabin.

At Sanford, Pierson, Thone & Strean, we’ve been a resource before and after such family discussions. Whether facilitating them, or sitting down after them, we can take your family consensus and turn it into a written plan that will help provide many more years of family cabin enjoyment.