With the seasons changing and Fall upon us, many people are thinking of closing up their camps and preparing them for winter. If you own a camp, or any vacation property for that matter, you likely reminisce about the summer and the family activities that took place while going through the tasks of preparing the property for the long winter. But, have you thought about how the family camp or vacation property can be kept for generations to come?
There are several techniques for transferring the family camp to the next generation. Each technique has strengths and weaknesses. It is imperative to consider your family’s needs and dynamics when choosing which technique is best for your family:
· Who, within your family, is entitled to use the camp and when are they entitled to use it?
· How will the costs of maintaining the camp be covered?
· How does an owner of the property get out? Can an owner sell to someone outside the family? Do other owners and/or other family members have a right of first refusal?
· Who is responsible for management of the property and day-to-day decisions?
· What happens on the death of an owner? Will the shares be transferred to the next generation?
Your family circumstances will dictate which transferring technique should be used to preserve your family camp or vacation property for the next generation. One technique that can be used is establishing a Family Limited Liability Company (LLC) to hold the property. This is particularly a good technique if you rent out the property for part of the year.
In a LLC, no member of the LLC is personally liable for the obligations of the LLC, which is important if you are renting your property for part of the year. A LLC agreement is created specific to your family situation and can outline who is responsible for managing the property, restrictions on transfer of ownership, how expenses will be paid, and even a usage schedule if needed. LLC agreements range from simple to complex depending on the family’s circumstances but a well drafted LLC agreement will ensure a mechanism to transfer the property to future generations.
If you own a family camp or vacation property, take some time this Fall as you close up the property to think about whether you would like to see the property remain in your family for generations to come. If you do, it is well worth meeting with an attorney to discuss options available to you. We would welcome the opportunity to discuss further how to preserve and transfer your family camp or vacation property to future generations.