United States: Keeping the Vacation Home in the Family: Family Compound Trusts

Originally Published in the Laconia Citizen, July 2011

Summer is fast approaching and for many families that means trips to the family cottage, camp or farm, a place where your family has enjoyed countless hours of fun and recreation over the years.  Whether modest or grand, these family vacation properties have special sentimental value to you and your family as a place to share common experiences and foster family traditions.  As you enjoy your time with the family this summer many of you will assume that your children, grandchildren and great grandchildren will also enjoy this special place in the future.  However, without proper foresight and planning, that might not be the case. 

Planning for successive ownership and management of family lake houses, camps, cottages, and farms (or "Legacy Property") presents many unique challenges and opportunities.  Generally, the senior generation desires to preserve the property so that it may be passed down from one generation to the next in an orderly manner.  It is important to ensure that tools are in place for the proper management and administration of the property in order to avoid disputes and conflicts among family members.  A trust, which we at the McLane Law Firm call a Family Compound Trust, affords the most flexible method for owning, managing and transferring unique family properties.
A well drafted trust has several advantages. Under NH law, trusts can now last in perpetuity. It can restrict ownership of the property to members of the family, thereby protecting the Legacy Property from creditors and unhappy marriages. It will provide a management structure for an orderly decision making process, including formulating annual budgets, calculating assessments, providing penalties for non-payment of assessments etc. Typically, the beneficial interests in the Family Compound Trust are divided into classes representing the separate family groups, with each family group owning Certificates of Beneficial Interest (or "CBIs"), which are similar to shares of stock in a corporation. It is then the CBIs which get transferred from parent to child to effectuate estate planning goals.

Estate Tax Benefits.  Legacy Property often represents a significant value in an individual's gross estate, and if it is lakefront property it may well appreciate at a greater rate than other assets. By creating a Family Compound Trust which holds CBIs, the grantor (the person who creates the Trust) can reduce his or her taxable estate in a number of ways.  One option is to take advantage of the annual gift tax exclusion amount (currently $13,000 per individual or $26,000 per couple) and give away beneficial interests (CBIs) to the children each year, thereby slowly reducing the value of the grantor's taxable estate. Another option is to give away all the CBIs upon creation of the Trust, thus using up all or a portion of the grantor's lifetime gift tax exclusion (currently $5 Million), but avoiding the future appreciation of the Legacy Property in the estate. With the current depressed real estate market, properties are appraising for much less than they did in past years and therefore property owners are able to use less of their lifetime gift tax exclusion to give away interests in Legacy Property.

Other Benefits.  There are many other reasons, other than saving tax dollars, which motivate families to create a structure such as a Family Compound Trust to own and manage legacy property.

Keeping it in the Family:  By establishing a written structure, the Grantor can make sure the property stays in the family by providing restrictions on the transfer and assignment of CBIs.  Generally, the Trust will not provide restrictions on transfers of CBIs to the descendants of the Grantor.  It will, however, prohibit the sale of CBIs to outside parties. 

Use, Rules and Regulations: Perhaps one of the most compelling reasons that families create a Family Compound Trust is to ensure that future generations enjoy the property in the same manner they enjoyed the property.  When more then one family owns property, disagreements as to its use, maintenance and transfer may arise.  The Family Compound Trust is designed to prevent, or at least minimize, such disagreements by addressing the issues clearly in the Trust document. 

Expenses and Assessments. Typically each CBI holder is responsible for his proportionate share of the expenses relating to the upkeep and maintenance of the Trust property based on his ownership interest. If it is anticipated that there will be a wide variation in the use of the property by different CBI holders, the trust can provide for unequal assessments to address the inequality of use. For instance, the Trust might provide that capital improvements are paid proportionately based on ownership, but ordinary expenses are divided based on usage of the property.  Additionally, the grantor may wish to provide for an endowment for future expenses.  How to structure the Trust document as to uses and expenses is ultimately decided on a case-by-case basis, but the advantages of tackling these issues ahead of time are endless.

Trustee.  It is important to appoint trustees (and successor trustees) who will manage and conserve the trust property, prepare annual operating and capital budgets, determine assessments and generally serve the best interests of the CBI holders. Any issues relating to the use and management of the property that were not addressed in the Trust document initially can be delegated to the trustees, who have the power to adopt rules and regulations for the everyday use of the property in the future.  

As summer begins and your family enjoys gathering at the family camp or cottage, you should consider effective planning to ensure your children, grandchildren and great grandchildren will enjoy your family treasure in the future as you do now.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
McLane Middleton, Professional Association
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
McLane Middleton, Professional Association
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions