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Passing on the Family Cabin (Part II)
By Gene Walden
(From The Minneapolis Star Tribune)

Those fun-filled days at the cabin can bring a family together and build a lifetime of childhood memories. But when the parents pass the cabin onto the kids, that same cabin can become a house of horrors that rips the family apart.

A recent column on how to minimize the hassles and heartaches of passing a family cabin onto the children brought a torrent of comments and questions from cabin owners on the dilemmas they are facing in dealing with their family cabin. Here are some of the questions readers posed:

Q. What if one of the heirs wants out of the cabin? How do you decide on acceptable terms of a buy-out agreement—particularly if one child wants to sell and the other children don’t want to buy?

A. According to Susan Link, an estate attorney with the Maslon law firm in Minneapolis, the terms of a buy-out agreement should be laid out in concrete terms in the trust. “The trust should dictate the terms of the sale—this is how it’s going to happen. The seller may not always get fair market value for his share, but the trust would lay out the terms so there is no dispute.”


Q. We have a three-way equal ownership with my wife’s parents and my wife’s brother. My wife’s parents want to give their one-third share to my wife and to their son. My wife’s parents also have two other sons that are not part of the cabin, nor are they interested in sharing in the ownership. Is there a good way to give the other sons some equal dollar amount of the value of the cabin upon the parent’s death?

A. The parents need to add an equalization clause to the trust that provides for similar payments of other assets to the other two sons, according to Link. A method of determining the value of the cabin should also be included in the trust, such as mandating an assessment of the cabin at the time of their death.


Q. When my parents pass away, we’ll have a 50-50 ownership in our cabin with my brother and his wife. We get along great with the brother, but could have some issues with his wife—and a divorce could happen at some point. How do you alleviate potential divorce issues and problems for our children after our death?

A. Put ownership of the cabin in a limited liability partnership (LLP) or limited liability corporation (LLC) and put a clause in the trust that says interest in the cabin can only be transferred to a blood relative, says Link. If your brother gets a divorce, your children (and his) would own the interest in the LLC or LLP—not your brother’s wife—or ex-wife.


Q. Which method is best in dividing up ownership of the cabin—an LLP or an LLC?

A. One is no more complicated than the other, according to Link and both serve the same purpose. Look at both options with your attorney and pick the one with which you’re most comfortable.


Q. We have seven children and 16 grandchildren scattered across the U.S. They all enjoy using the property in various degrees and with various levels of opportunity. We are looking for a way to pass on some or all for joint use in the future.

A. You can divide up the property with an LLP or LLC that gives everyone part ownership in the property. But if one or two of the heirs will be using it more, terms of use and maintenance responsibilities should be set up in the trust. Those who plan to use it the most should probably be obliged to contribute more to maintenance costs, but the trust should stipulate that everyone should be required to contribute some money to cover those costs.


Peter McClellan, a financial advisor with Lakeville-based 401k Latte Company, has dealt with so many clients who had cabin problems and similar estate issues that he has written a book on the subject, “Cabinosity,” that he plans to publish in the next few weeks. (For more information on Cabinosity, contact McClellan at 952-882-0400.)

“It’s ironic that what pulls a family together can later pull them apart,” says McClellan, “Unfortunately, there’s not always a legal answer to every issue that’s going to keep the family unified.”

Communications between the parents and the children is essential in preventing cabin issues from fracturing family unity. “The parents need to sit down with their children and say ‘don’t you dare dishonor us by fighting over this cabin. There’s going to be disagreements, but just love each other through them and work things out.’”

But if the disagreements and disharmony continue, says McClellan, there’s only one good solution. “Every agreement needs an ‘out’ clause. Either work things out or get rid of the cabin.”

To read Part I, click here .



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