The Value of Summer Memories at The Family Cottage
It doesn’t matter what time of day you arrive, everything always looks the same. Granted, the trees are taller and wildflowers seem to be growing everywhere. But your family cottage is the same to you today as it’s always been.
Cubby holes filled with trinkets and treasures
While waving hello to neighboring friends you realize every family cottage and summer home is as different as the memories gathered by families every summer. Each cottage has a special cubby hole filled with trinkets and treasures from sandy beaches and hiking adventures through surrounding woods. Weathered hinges guarantee screen doors will squeak open and slam shut right on cue announcing that this is summer. It’s easy to get caught up in the moment of racing down to the lake and assuming every summer will be just like the last.
My son Casey has been crossing out days on the calendar as the school year winds down into his summer up north. He’s been talking non-stop about everything he wants to do this summer, and spending time with those who are a part of his summer. Without fail, his list includes everything he wants to do each summer. I’ve also been thinking about these excursions and of how to keep our lunch dry during our annual trip down the Crystal River (see photo).
As much as family cottages and memories stay constant, change and different circumstances ultimately visit families over time. Your family cottage is often one of your most valuable legacy assets and attention should be directed to new options and enacted tax laws available to you to protect your family cottage now, and for future generations.
Family goals remain the same
It’s no surprise that in spite of our busy lives some things never change. Family goals remain the same of protecting those you love, the place you love, and protecting the experiences and cottage memories you love.
When your family begins to gather this summer consider talking with them about the future of the family cottage. Now might be the time to begin the discussions about developing a cottage succession plan, 
if you haven’t already, and looking at short- and long-term strategies and legal structures to avoid the uncapping of your property.
At the minimum, a solid cottage succession plan protects your family cottage from passing outside the family, solves future conflicts between family members about how the family cottage is operated, maintained and improved, and probably most important of all, avoids, through the right to partition governed by real estate laws, the forced sale of your family cottage.
Even a simple plan, which you can easily change and update, is better than the consequence of not having a protective cottage succession plan in place.
Protecting a special place
You know deep in your heart this is where your family memories live, and like a protective mother bear you’ll do whatever you need to do to protect this time, this special place for future generations.
If you have questions or need additional information about planning for your cottage, please call and also visit our Cottage Law website about how to protect the family cottage at www.Cottage-Law.com.
Now if I could just figure out a way to protect my brown-bag lunch during my upcoming water adventures with Casey….
Dan A. Penning
A problematic trend seems to be emerging with banks failing to properly discharge liens of previous property owners. Recently when I’ve been assisting clients in the sale of both commercial and residential real estate we’ve encountered significant problems caused by banks that failed to properly discharge liens of previous owners after my clients purchased the property. These lien discharge problems have in some instances almost caused sales to be terminated and have caused significant delays resulting in hardship and increased costs for the parties to the transaction.
Recent oral arguments presented by attorney Dan A. Penning, before a Michigan Court of Appeals panel of judges, resulted in a unanimous 3-0 vote in which the Appeals judges upheld the trial court’s decision dismissing the case.
Recently, many of my estate planning clients have asked questions about Lady Bird Deeds and when it is appropriate to use these instruments in estate planning. Like any planning tool, a Lady Bird Deed can be helpful in some situations, but is not appropriate in all cases. The use of a Lady Bird Deed in the wrong situation can lead to unintended or negative results.
The most common type of deed that people are familiar with is where there is an outright transfer of ownership from one party to the other, such as in the sale of a residence. This most common type of transaction utilizes a “fee simple” deed which is used to convey property from one (or more) owner to another. When Person “A” conveys real property to Person “B” by a “fee simple” deed, Person “B” becomes the owner of the property immediately upon the execution of and delivery of the deed.
In some situations, Lady Bird Deeds can also be used as part of Medicaid planning and, in fact, that is where they first became very popular. A Lady Bird Deed may work well where someone who is currently receiving Medicaid benefits as a way to pass the property at their death without the necessity of probate. This is true because Medicaid policy provides that a Lady Bird Deed is not a “divestment” (transfer of assets that results in a penalty).
In addition, certain transfers invalidate the ability of an individual to claim a homestead exemption in the state of Michigan with respect to their residential property taxes.
As we have mentioned in previous emails and other communications from our office, it is important that children, once they reach the age of majority (18 in Michigan), execute a Financial Durable Power of Attorney form and Medical Power of Attorney. A Medical Power of Attorney allows the individual nominated in the document the right to have access to medical records and be involved in medical decision making. A Financial Power of Attorney allows the agent designated to handle financial matters on behalf of the young adult. For students going to school out-of-state, the question arises whether to have legal documents created in the student’s home state, the state in which they attend school, or both. While the laws in most states are comparable so that a Power of Attorney created in one state usually will be respected in another, that is not always true.
For the time being, the Senate has again abandoned efforts to impose a “carried interest tax” on venture capitalists, investors, and managers of family businesses. The tax would have increased the 15% capital gains tax rate on certain investors’ profits to the top income tax rate, which is scheduled to hit 39.6% on January 1st (H.R. 4213). The share of investors’ profits is called “carried interest.” It might appear at first glance that it’s perfectly fine for investment managers to be taxed at higher rates on their “carried interest.” But venture capitalists and investors don’t reside exclusively on Wall Street. The law was written so broadly that it could have hit approximately 6.5 million people invested in real estate partnerships that own anything from a single dwelling to sizable commercial properties.
In reality, the proposed legislation could have imposed a higher tax rate on any partnerships invested in particular assets. The higher rates would apply to investment gains and also to gains from the sale of the partnership, and therefore, a sale of the family business would not qualify as a capital gains transaction. Family operations are commonly formed as partnerships and managed by a family member. Under the proposed legislation, the managing family member could be subject to the “carried interest tax.” For a family partnership to gain liability protection and also not be subject to the higher taxes, an outsider – not a family member — would have to manage the partnership. The House version of the legislation exempted family farms and ranches held in partnerships. Other family partnerships would have had to wait for the Treasury Department to exempt them through regulations.
Wealth managers, broadly defined, are those individuals who help you manage your financial world and/or implement aspects of your financial strategies. Common examples of wealth managers are financial advisers, life insurance agents, accountants, tax advisors, attorneys, etc. With more than 11,000 wealth managers in the Detroit area, how do you find someone who listens to you, represents your interests and operates with an emphasis on integrity and service? HOUR Detroit magazine can help. The magazine formed a partnership with Crescendo Business Services to find out which wealth managers scored highest in overall satisfaction.
The resulting list of 2010 FIVE STAR Wealth Managers is an elite group, representing less than 7 percent of the wealth managers in the Detroit area. Only 686 of the top-scoring wealth managers made this year’s list. . . . ”
Recently, many of my firm’s clients who own multiple acres of land in northern Michigan have been contacted by petroleum company representatives and offered oil and gas rights leases for their land. While many of these companies are reputable and offer fairly standard terms in their leases, they are generally trying to secure leases that are most favorable to them. The landowner should be aware of provisions that can be included to protect their investment and maximize the owner’s financial return.
A “Pugh Clause” protects the landowner by requiring the oil and gas company to release certain land subject to the lease after termination of the lease term that has not been pooled into the land subject to the royalty payment in the event an active well results from the lease and exploration. For example, an oil and gas company may only pool an apportion of the leased land for royalty purposes and without a Pugh Clause, the companies in some instances can tie up the entire parcel subject to the lease even though they are only paying royalties on a portion of the land.
