Brown & Associates - Attorneys & Counselors at Law, P.L.L.C.

AVOIDING CONFLICT OVER THE VACATION HOME

By: Jerry Shiles

Over the years, clients have complained of problems they’ve encountered sharing cabins and lodges with their brothers or sisters. These problems usually involve inherited property, but occasionally clients find themselves in unpleasant situations of their own making.

In one case several brothers and cousins shared a hunting lodge. Everyone wanted to use it during hunting season and bring along all their friends and the lodge couldn’t accommodate everyone. Also, some owners wanted to grant hunting rights to friends, either free or paid, including the right to use the lodge. The controversy raged on for several years as the tension built to a breaking point. Finally, threats of lawsuits, letters from attorneys and a total breakdown of communication threatened to tear the family asunder. Only through a final concerted effort on everyone’s part was a lawsuit averted and an accommodation reached.

Another case involved a cabin inherited from parents. While Mom and Dad were alive, there wasn’t a problem as Dad ran the family and controlled the usage of the cabin in with an iron hand. When he died, Mom picked up the cudgel and dictated its usage.

Neither Mom nor Dad considered what would happen once they were gone and left the cabin to their children in equal shares without a plan or structure for its use. You know what happened. The children squabbled constantly about the usage plan, maintenance and repair responsibilities, taxes, you name it. Soon they wound up in their respective attorney’s offices over perceived breaches of their rights.

You see the problem. What’s the solution?

The key to avoiding problems is advance planning. If you are the mom or dad, you might want to create a "Cottage Trust." At your death, the trust and not your children will own the property and its control and management will be vested in a trustee, probably not one of the trust beneficiaries.

The trustee holds the real estate for the benefit of the named beneficiaries. These can include your children, grandchildren, great-grandchildren or anyone else you want to be able to share in its use.

The trustee should make and publish rules on the scheduling and use of the property, its maintenance and repairs, general upkeep requirements, and prohibited uses of the property. He or she should allow the beneficiaries to use the property for vacations and shorter stays, but in an organized way. The trustee can develop a schedule prior to each year, in consultation with the beneficiaries, specifying when each family unit (normally defined as your child or principal beneficiary, his or her spouse and their children) is able to use the property during the coming year.

All family units should have equal access to the property. Each of them cannot use the property at the same time, such as during Easter break or during hunting season or the first two weeks of the summer, but if the trustee establishes a five-year plan, all family units should be able to be accommodated within that time-frame.

If your beneficiaries cannot agree on usage dates, the trustee can use a lottery to determine the order in which the family units choose their dates. This can be done by having the family units draw lots or by having the trustee establish a rotating schedule each year which isn’t disclosed to the beneficiaries until time for them to make their selections. The first family unit chooses, the second follows, and so on until every family unit has selected its dates for the year.

Greasing the skids

Even with a Cottage Trust, there are going to be financial issues. Someone will complain of bearing the brunt of the maintenance expense or spending more time than the others mowing the surrounding grounds, painting, hauling off brush, etc. To avoid at least some of these problems, you might "seed" the trust with enough money to cover maintenance, taxes, insurance, utilities, repairs, and upkeep, with a large enough reserve to cover unanticipated emergencies.

If you cannot properly seed the trust, you can authorize the trustee to collect a fee from each family unit to augment this fund. The amount charged should be left up to the trustee, who can evaluate the prior year’s expenses, identify anticipated costs for the coming year, and establish a fee adequate to meet the trust’s needs.

If only a few family members will use the cabin and it will stand vacant for long periods, you can authorize the trustee to rent out the property for limited periods during the year which do not conflict with the desired usage dates of the beneficiaries.

Not all my children will want to use the property. What then?

This isn’t unusual. Several children may have fond memories of the cabin or cottage and want to return to it each year. Others may have no interest in it and want to turn it into cash. I’d give the trustee the right to sell the property under certain conditions, such as if a simple majority, a 2/3 majority or all of them agree. You can also include a fail safe provision, such as if the usage fees available aren’t sufficient to cover the property’s expenses, the trustee may sell the property.

If the property is to be sold, I recommend your children be given a right of first refusal to purchase it at its appraised value. This allows those who want to keep it in the family to do so. If having two or more of your children buy the property together would cause problems of the sort mentioned earlier, you can direct the trustee to auction the property off to the highest bidder.

What if members of a family unit cannot agree among themselves?

If your children are living, they should be the vote casters for their separate family units. This won’t iron out the wrinkles between a husband and wife, but at least the family unit will speak with and through one voice. If one of your children should die, you can require the family unit to name a new spokesman and if they can’t agree, the trustee can "take a vote" of all adult members. Or you can simply specify a hierarchy in the trust, such as "first my son, then his wife, then his oldest child, etc."

Having a nice cabin in the mountains or a condominium on the beach is a great feeling. It will feel even better if you have the necessary safeguards in place to avoid conflict and maintain peace and harmony in the family.

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