Cabin Trusts
In Wisconsin and throughout the upper Midwest, many families have enjoyed countless summer days and nights at a family cabin or cottage. Often, the cabin has been in the family for years. Through continual use, the cabin becomes a place that creates fond family memories for multiple generations. Parents bring their children to the cabin, then their grandchildren, and maybe even their great-grandchildren. The idea of maintaining and preserving the family cabin for future generations becomes a topic of great interest to many families. The same thought process often applies to hunting land or a hunting cabin. Unfortunately, when it comes time to transfer the cabin, cottage or hunting land to the next generation, problems and arguments become commonplace.
Difficulty arises when an older generation tries to create a plan that will address the troubles of common ownership among family members. For example, if a husband and wife own a lake property in Vilas County, WI and they have four children, it seems quite simple from a planning standpoint. Basically, when husband and wife die, the property will be given to the four children. But, one or more children may not have fond affection for the cabin or one or more children may not live close enough to Northern Wisconsin to thoroughly enjoy the cabin. Further, one or more children may not be able to afford the property taxes or maintenance expenses related to ownership. The older generation must develop a plan that will work to accommodate different desires, needs, and the proper ownership form for the cabin.
Common ownership among various siblings also creates creditor problems. For instance, if four siblings own a cabin together, and one sibling is pursued by a creditor, the creditor may obtain a judgment against the sibling resulting in a judgment lien attaching to the family real estate. This presents a real dilemma. Further, a child may need to file personal bankruptcy. If the real estate is owned in common by the siblings, the child’s ownership interest in the family cottage or cabin will become an asset of the bankruptcy estate. As a result, the bankruptcy trustee may seek to sell the bankrupt child’s interest to pay creditors. This event alone would create a severe situation for the other siblings and is certain to create a family dispute.
The above presents a short summary of the legal problems associated with trying to preserve a family cottage, cabin or hunting land with common ownership. Common ownership among siblings is destined to create difficulty and struggle. Moreover, in our example above, once the four children pass away, the real estate will be owned by even more family members. For example, if the four children each have three children, the family real estate will now be owned by 12 different people and will be subject to 12 different individual wills and 12 different sets of creditors.
What is the solution? Vogel Law Firm, Ltd., of Janesville, Wisconsin has developed a form of ownership that will alleviate the problems mentioned above and create a uniform system to address property costs, property usage and rights of family members. If you have a piece of real estate that you want to preserve in the family for one or more generations, then you must give serious consideration to creating a trust that will own the real estate after your death. With a properly drafted trust, you will be providing your descendants with the means to truly preserve and protect a treasured family asset.
What are the benefits of a Cabin Trust?
A Cabin Trust provides creditor protection. When real estate is owned in the name of an irrevocable family trust, the creditors of the beneficiaries of the trust (a person’s lineal descendants) cannot pierce through the trust. If the real estate is owned in individual names, then the treasured family property is possibly subject to divorce actions, tax liens, lawsuits, bankruptcy, creditors and judgment liens.
A Cabin Trust provides a means to address payment of taxes, insurance and maintenance. After the older generation has died, new owners must determine a method to equitably pay for property taxes, insurance and maintenance costs associated with common ownership of the family cabin, cottage or hunting land. Regularly, the payment of expenses creates family quarrels that the older generation would never wish upon their descendants. For instance, if one child doesn’t use the cabin, he or she will not want to pay any of the expenses. Yet, this child continues as an owner just like his or her sibling that is stuck paying the expenses. A cabin trust creates a structure to properly address payment of taxes, insurance and maintenance costs that will be fair to all descendants.
A Cabin Trust creates a usage structure for the property. When you have more than one person that owns a property, the question of usage rights becomes paramount. How do they determine which child is permitted to use the cabin for the Fourth of July weekend? What about Christmas, Thanksgiving, opening weekend of fishing season in Wisconsin, or deer season? With a trust, you set forth the provisions to address usage rights in a detailed manner so that the children are not left trying to sort out the question of usage. The goal is to alleviate miscommunication and disputes among your descendants.
A Cabin Trust creates a means to address the failure of a descendant to contribute to expenses. Unfortunately, not every child or more remote descendant will take a strong liking to the family cabin for a variety of reasons. When this happens, the descendant will also not want to contribute toward payment of any expenses associated with the real estate. The cabin trust provides a structured means to address the descendant who doesn’t use the cabin and doesn’t want to contribute toward property expenses.
A Cabin Trust sets forth the provisions to determine whether the family cabin will be sold. Due to a variety of circumstances, it may become necessary to sell the family real estate at some point in the future. With common ownership, a sale requires the consent and signature of every descendant. This may seem reasonable, but if three of four siblings want to sell the cabin, the fourth sibling can stop the sale and force a legal battle. With a cabin trust as the owner of the property, the older generation creates a means to determine whether and when the family real estate will be sold. Since the means are set down in black and white, your descendants will not be able to fight about the process. A cabin trust avoids the need for a legal partition action and other lawsuits brought to force the sale of commonly owned real estate. Again, you want to preserve the peace among family members.
A Cabin Trust provides a means to determine whether descendants must contribute toward expenses. Payment of expenses can create significant hostilities. A child with the means may become frustrated because he or she pays for all of the taxes, yet his or her siblings use the cabin as often as the paying child. A cabin trust provides measures to address non-payment of expenses by descendants.
- A Cabin Trust provides the means to transfer “ownership” of the treasured family real estate to countless generations. Certainly, a cabin trust is designed to benefit your children, but as time moves on, your children will also pass away. The cabin trust includes provisions for the family cabin or cottage to benefit grandchildren and great-grandchildren. The idea is preservation for the long-term. A cabin trust is the solution.