Law Office Report - Summer 2009
Protecting the Family Cottage for Future Generations
Attorney Keith J. PilgerThe arrival of summer brings with it the long weekends at the family cottage in Wisconsin’s great northwoods where generations gather to spend time together at one of the family’s most prized possessions. Whether it is the cottage on a lake up north, the hunting land, or even the family farm, the attachment to these places is the same. As generations age, the question becomes how to pass the property on to their heirs while protecting it for the future generations of the family to use and enjoy.
In many cases family members may simply choose to co-own the property by each holding title to a portion of the property. For example, a brother and sister may each own title to a one-half interest in the property. While this is a simple solution, it is not the best. Unfortunately, siblings do not always co-exist in complete harmony. Joint title ownership brings with it a slew of problems that can arise. For example, each co-owner can force a sale of the property through an action for partition under Wisconsin law. Co-owners are free to mortgage or transfer their interests in the property to non-family members. In the event one of the co-owners goes through a divorce or becomes bankrupt, their ownership in the property may be an available asset, and there is no clear system in place for the management of the property.
Many of the problems associated with shared ownership referenced above can be addressed by using a limited liability company (“LLC”) to own the property. The use of LLCs for all types of businesses has exploded in recent years. This is due to their flexibility that allows them to be adapted to many different situations, including ownership of the family cottage, farm, or recreational property.
Placing ownership of the property in an LLC allows the owners (through the operating agreement of the LLC) to put into place a system for management and control of the property, place restrictions on the transferability of each family member’s interest in the property, provide for the terms of a buyout in the event a family member no longer wishes to be an owner, and provide for dispute resolution procedures in the event there is a conflict among the owners. In addition, an LLC provides a mechanism for the transfer of a portion of ownership of the property to younger generations without giving up control. Also, if the property is out of state, an LLC can avoid an ancillary probate proceeding in that state upon an owner’s death.
The business group at Anderson, O’Brien, Bertz, Skrenes and Golla has a great deal of expertise in organizing LLCs and drafting operating agreements to fit every type of situation. If you are planning to pass the family cottage, farm, or recreational property down to future generations, you should start planning now.