If you die without a specific plan for the family cottage, the property will ultimately be distributed to your heirs equally, setting the stage for a family division—a battle between heirs who can afford and have the time and desire to use the property, and those who do not. 

When property is owned by more than one person, the method of ownership is known as "tenants in common." Holding property as tenants in common may give rise to many problems, not limited to: (1) one or more owners are unable or unwilling to pay for expenses, (2) conflicts in the schedule for use, and (3) the event of an owner's divorce or death. Often the biggest concern is that an individual owner's inheritance will be forever "trapped" in the cottage. 

Oftentimes, differences in economic and family circumstances place tremendous and opposing pressures on the co-owners. The solution to the tenant in common problem is the Limited Liability Company ("LLC"). LLC law allows the co-owners of the family cottage to define for themselves the terms and conditions of their co-ownership. With a limited liability company, all the cottage owners become "members" of the LLC, and make all the decisions involving the property. The LLC must have a written agreement with the co-owners setting out guidelines and rules, commonly known as an "operating agreement." The operating agreement contains the roadmap for current and future cottage owners. 

With an LLC, you specifically tailor every aspect of the family cottage co-ownership. The operating agreement will reflect your goals for the property and your desires for future generation by setting forth rules for cottage management, financing, use and improvements. The agreement also establishes a legally binding procedure for how the cottage is passed from generation to generation.

Most operating agreements will address the following issues:

• Rights and restriction to sell out
• Gifting the cottage within the family
• Scheduling use
• Sharing expenses
• Voting and management

Our goal is to help our clients understand the implications of leaving the family cottage ownership "as is," as well as the benefits and challenges in establishing an LLC. We hope to accommodate the entire process so that ultimately the family cottage continues to be a source of enjoyment and pride for current and future generations.