This question was answered by Doria Aronson of the McLane Law Firm
Q. How can I make sure my children and grandchildren continue to enjoy our lake front property after my spouse and I have passed away?
A. Planning for successive ownership and management of family lake houses, camps and cottages ("Family Property") presents unique challenges. Many of us have heard horror stories of siblings inheriting a Family Property jointly only to end up fighting over the expenses, the use and ultimately whether to sell the property. If your goal is to preserve the Family Property for future generations, it is important to ensure that the necessary tools are in place for the management and administration of the Family Property. A Family Compound Trust ("FCT") affords the most flexible method for owning, managing and transferring these unique Family Properties.
Transferring your Family Property using a FCT has several advantages. The FCT can provide a vehicle for estate and gift tax planning, it can restrict ownership of the property to family members, thereby protecting the Family Property from creditors and divorces and, maybe most importantly, it can provide a management structure for orderly decision making for your children and grandchildren after your death.
Estate and Gift Tax Advantages. Family Property often represents a significant value in an individual's gross estate. A FCT offers several gifting opportunities that can help an individual reduce the value of his/her taxable estate at his/her death. In the currently depressed real estate market, the opportunity to gift real estate (or portions of real estate) at a reduced value allows you to transfer Family Properties while using less of your lifetime gift tax exclusion amount.
Keeping the Family Property in the Family. The FCT provides a way to keep the Family Property in the family by placing restrictions on the transfer of the beneficial interests in the Family Compound Trust to outside parties. Generally, the beneficial interests can only be transferred to your descendents (i.e., children, grandchildren, etc.).
Management Structure: One of the most appealing characteristics of a FCT is the ability to provide a management structure for future generations. When numerous families own Family Property, inevitably disagreements as to expenses, maintenance and use will arise. The FCT is designed to prevent, or at least minimize, such disagreements by addressing the issues before they arise.
A little planning can greatly benefit your children and grandchildren by providing them with a structured way to continue family traditions at your lake front property.
Doria Aronson is a shareholder at McLane, Graf, Raulerson & Middleton, where she is a member of the Litigation Department and the Employment Law Group.
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.
