Saving the Family Cottage: Creative Ways to Preserve Your Cottage, Cabin, Camp, or Vacation Home for Future Generations

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7th Edition

Saving the Family Cottage

Creative Ways to Preserve Your Cottage, Cabin,

Camp, or Vacation Home for Future Generations

Attorneys Ann O’Connell and Timothy Borchers

Foreword by Deborah Wyatt Fellows

SEVENTH EDITION

MARCH 2025

Editor

ANN O’CONNELL

Proofreading

JOCELYN TRUITT

Index

RICHARD GENOVA

Printing

SHERIDAN

Names: O’Connell, Ann (Ann Kristin), 1979- author. | Borchers, Timothy author. | Fellows, Deborah Wyatt, writer of foreword.

Title: Saving the family cottage : creative ways to preserve your cottage, cabin, camp, or vacation home for future generations / Attorneys

Ann O’Connell and Timothy Borchers ; foreword by Deborah Wyatt Fellows.

Description: 7th Edition. | El Segundo : Nolo, 2025. | Includes index.

Identifiers: LCCN 2024037448 | ISBN 9781413332407 (paperback) | ISBN 9781413332414 (ebook)

Subjects: LCSH: Estate planning--United States--Popular works. | Vacation homes--Law and legislation--United States--Popular works.

Classification: LCC KF750.Z9 H645 2025 | DDC 346.7305/2--dc23

LC record available at https://lccn.loc.gov/2024037448

This book covers only United States law, unless it specifically states otherwise.

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Dedication

I dedicate this book, which I am delighted to share with a terrific co-author and editor, attorney Ann O’Connell, to:

My mother’s family, for whom Whitney Lane in the vacation village of Sandy Creek, New York, is named, where I spent every summer in the 1960s and early 1970s. Special mentions for Aunt Jane, who made up our beds on the breezy porch; crazy cousin Ernie, who taught me the Tarzan call; and my dear mother, who taught me to love the pond, the rowboat, the sand, well water, and sunsets and sunrises at the Camp.

My siblings, who still share the love of summertime.

My children, who appreciate all four seasons at our second home in New Hampshire and are bringing their kids up the same way, and who embrace work weekends and our new logbook.

My wife of more than 40 years, Ruth, who didn’t mind too much when I felled a tree on top of the playset in New Hampshire, who pilots our boat, and who brought her wonderful parents, Charlie and Mildred, up the country to enjoy many hours of reading and playing games with our kids—not to mention baking biscuits and helping with projects. Thanks for Livin’ the Dream with me.

—Timothy Borchers, Esq.

I dedicate this book to my parents, who instilled in me an appreciation of long car rides to the cabin (spent listening to baseball games on the radio and the occasional U2 tune) and the scent of the lake, and to my sister, who knows exactly what I’m talking about.

—Ann O’Connell, Esq.

Acknowledgments

Tim and Ann would like to acknowledge and give thanks to the original authors of this book:

Stuart J. Hollander, the original author of this book, spent his summers in northern Michigan on Elk Lake and Torch Lake. A graduate of the University of Michigan and University of California College of the Law, San Francisco (formerly University of California, Hastings College of the Law), he was a partner in an international law firm in San Francisco before returning to live in northern Michigan in 1989. The focus of his practice was cottage law, a field he pioneered, even coining the term cottage law.

He was a member of the Tax Court; the State Bars of Michigan and California; the Probate & Estate and Real Property Sections of the State Bar of Michigan; and the Estate Planning, Trust and Probate Law Section of the State Bar of California.

Stuart spoke on cottage law to many groups, including lake associations, historical societies, and professional organizations such as the Real Property Section of the State Bar of Michigan. He was interviewed by many publications on the subject of cottage succession planning.

Stuart passed away unexpectedly in August 2007, following the release of the first edition of this book.

Rose Hollander has spent many years working and living in the heart of Michigan cottage country. She was the legal assistant/paralegal in a law practice with her husband, Stuart J. Hollander, whose practice centered on estate planning to help families concerned about passing on vacation homes. Rose met with families, helped draft documents, and helped families administer the estate after a death.

About the Authors

Ann O’Connell, Esq. is a legal editor at Nolo specializing in landlord-tenant and real estate law. She is a coauthor of Nolo’s Essential Guide to Buying Your First Home, Every Tenant’s Legal Guide, Leases and Rental Agreements, Renters’ Rights, and Every Landlord’s Legal Guide. Before joining Nolo, Ann was a freelance writer for other publications and law firms. She is a member of the bar in California, Nevada, and Colorado, where she is both an active attorney and a real estate broker. Ann has practiced in California and Colorado, and had her own firm in Colorado, where she focused on real estate, landlord-tenant, and small business law. Ann earned her B.A. from Boston College and her J.D. from UC Berkeley Law.

Timothy B. Borchers, Esq. is a practicing lawyer and trustee with offices in Medfield, Massachusetts, and Concord, New Hampshire. His practice consists primarily of trusts and estate planning; probate, tax, and elder law; and fiduciary services as a trustee, personal representative, and attorney-in-fact. Corporate and real estate law connected to estate planning complete his practice. Mr. Borchers has personally advised in more than 500 estate and trust settlements and more than 2500 estate plans, and has served in more than 125 fiduciary appointments. Mr. Borchers is admitted to the Massachusetts and New Hampshire Bars and is a graduate of Boston College Law School (J.D.), Cannon Trust School, and Bowdoin College, A.B., summa cum laude. He holds these certifications: Estate Planning Law Specialist, the Estate Law Specialist Board, Inc., accredited by the American Bar Association; Accredited Estate Planner®, the National Association of Estate Planners & Councils; and Certified Trust and Fiduciary Advisor, the American Bankers Association. Ranked AV Preeminent by Martindale-Hubbell® and selected to Super Lawyers® for the state of Massachusetts.

Borchers Cusano Trust Law, P.C., was founded in 1995 by Mr. Borchers and today has more than 1,000 client units enrolled in ongoing support of their estate plans. The firm provides more than 200 new plans each year and settles 50 to 100 estates and trusts at any time.

Mr. Borchers also co-founded Northeast Private Trustee Services, LTD., located in Medfield, Massachusetts, and Concord, New Hampshire.

He originated and authored the Heirloom Ownership Trust™ and the HOT Property Toolkit™, the Inheritance Trust™, and the Family Health Trust™.

A native of New Hampshire’s North Country, Tim loves hiking, skiing, water sports, and performing classical music. Tim is married to Ruth MacDonald Borchers. They have eight children and numerous grandchildren, and reside in Medfield, Massachusetts, and Moultonborough, New Hampshire.

Foreword

I publish magazines about one of the most beautiful places in the world. It’s the kind of place that people who live elsewhere dream constantly about returning to and only feel their arrival is real when the landscape is populated with more trees than houses and the air seems somehow injected with pure and heady oxygen.

Of the many universal truths I’ve learned about places such as this, one of the most stunning is the collective pool of emotion and goodwill attached to the family cottage. It really is true that the silky threads of daydreams and laughter, serenity, and joy weave their magic whether the cottage is nestled in the mountains or alongside a lake. People who have never experienced life at a family cottage sometimes accuse me of looking on that experience through rose-colored glasses. To which I reply that there is no need for glasses. The very light itself is magic.

I have spent a lifetime trying to distill the shared pieces of life at a cottage into some set of words and photos that would capture the experience on paper once and for all. Is it the welcoming embrace of an old lavender daybed where a book lies waiting in the yellow light of the screened porch? Is it days filled with woods and water and swimming rafts that bob and dip as each child’s body is hurled toward the water with sheer abandon, frozen for just a moment in midair? Is it the meals of fresh corn and cucumber salads eaten outside, in laps or on weathered tables, as the evening sun, still high in the sky, filters through the trees as if through emerald lace? Is it the calm, the peace, the quiet when all of life’s intrusions that seem so unavoidable at home are effortlessly held at bay? Is it the laughter? Surely it is the laughter that shrieks from the card table and bubbles up from the lake and drifts gently and softly out into the night like music from a distant piano.

When my siblings and I each chose to return to the region in which we had spent a part of every summer, I could find no explanation for this migration other than that we’d returned to the place where we had been happiest. As is true for so many families, the cottage was the elixir that brought our family closer together. And so it is some kind of tragic irony that, when the time comes to discuss changes in ownership—say, when grandparents die and the cottage passes to the next generation—sorting out the particulars can shred the same family ties that the cottage made strong.

When cottage decisions rip families apart, the causes generally lie in a potent mix of emotion and dollars. Some members want to hang onto the cottage and keep rich traditions alive. Others want to sell the cottage and split the money—perhaps their lives don’t allow them to use the place, and they want to cash out. If those wanting to keep the cottage can’t afford to buy it from the others, the family can be headed down a painful road of argument, resentment, and even lawsuits.

Saving the Family Cottage is the tool families need to avoid all this. This book is a comprehensive guide that explains how, through careful planning, the gift of the cottage experience remains available for generations to come. Those families know that as the world moves faster and faster, as global economies and technology pull us further and further apart, there will always be a need for a simple place, bathed in sunlight and solace, that quite effortlessly brings us closer together.

—Deborah Wyatt Fellows Founder, Traverse, Northern Michigan’s Magazine

Table of Contents

Your Cottage Companion

Part I: Cottages at Risk

1 Trouble in Paradise

Time for a Plan

The First Step

2 Avoid the Worst: A Partition Parable

3 Plan for the Best: Cottage Succession Goals

Founders’ Goals

Heirs’ Concerns

Shared Concerns

Part II: Choosing the Right Path

4 No Plan? Then 600-Year-Old Law Controls the Cottage

Direct vs. Indirect Ownership

Concurrent Ownership

Tenancy in Common

Nine Rules of Tenancy in Common

5 Other Animals in the Property Law Zoo

Joint Tenancy

Indestructible Joint Tenancy

Tenancy by the Entirety

Community Property

6 How a Plan Helps Save the Family Cottage

7 Short-Term Solutions

Using Life Estates

The Co-Ownership Agreement

The Requirement of Sale or Short-Term Ownership

The Heirloom Covenant¹

Part III: Forming Your Entity

8 Choose the Right Legal Entity for Your Cottage

Trusts

General Partnerships

The Limited Partnership

The Corporation

The S Corporation

The Limited Liability Company

Comparing the LLC to the Pretenders

The Big Picture

9 When and How to Organize the Cottage LLC

Now: The Immediate Cottage LLC

Later: The Springing Cottage LLC

The Mechanics of LLCs

The Role of the Attorney

Part IV: The Details: Putting Your Cottage Plan Into Action

10 Welcome to the Club

Who Is in the Cottage Club?

The Branch Concept

Forming a Nonprofit Association: A Possible Option in Some Rare Situations

11 Cottage Democracy

Member Management

Using Managers

12 Scheduling and Use

Kinds of Sharing Systems

Creating a Fair and Sustainable Cottage-Sharing System

Cottage Users

Unacceptable Behavior at the Cottage

13 Renting the Cottage

Is Renting Allowed?

Rental Operations

Who Is the Landlord?

Liability

14 The Cottage Safety Valve

The Put Price

The Discount

The Put Terms

Part V: Financing the Future

15 Minimizing the Federal Tax Bite

Death, Taxes, and Cottages

The Price Tag on Cottage Units

Appraisals and IRS Reporting

Be Aware of the Stealth Capital Gains Issue Created by Gifting

16 The Ultimate Gift: A Cottage Endowment

What Is an Endowment?

How Is an Endowment Established?

Size of the Endowment

How Do Heirs Feel About an Endowment?

The End of the Endowment

How an Endowment Is Used

How an Endowment Is Managed

Glossary

Appendix

Using the Downloadable Forms

Editing RTFs

List of Forms Available on the Nolo Website

Index

Your Cottage Companion

People lucky enough to own a beloved vacation home often want to pass this family treasure to future generations. They envision their children, grandchildren, great-grandchildren, and subsequent generations bonded together by this singular place, a place where descendants leave sandy footprints, gather around fires together, and share hot chocolate as it snows. Leaving a cottage to descendants bonds a family together for another generation or more. It gives the extended family, throughout time, a place to gather and feel as one.

But without some thoughtful planning now, problems and conflict in future generations (among siblings or, in the next generation, cousins) are almost inevitable.

What kind of conflict? It’s very likely that eventually, at least one co-owner will:

leave or lose an inherited share of the cottage to a spouse

be unable to afford to pay cottage expenses

not want to own the cottage, or

need money and resent having an inheritance that is trapped in the cottage.

One study found that of Canadian cottage owners who planned to give their cottages to family members, 11% said the cottage already had caused a rift within their families, and 22% believed it would be a source of disagreement after the gift was completed. All this, before the cottage even changed hands.

But won’t they work it out? After all, most people believe that