Cabins are common throughout Minnesota, especially around its 10,000 lakes where individuals and families are able to swim, relax, fish, boat, and relax by a campfire in the evenings. However, not all of these cabins are owned by just one person or one couple. Many individuals will jointly own the cabin with others in order to share the expense and upkeep. There are also cases where a parent passes away and the children jointly own the cabin.
At first, informal ownership agreements seem like the best way to own lake property so that everyone involved can afford to do so. Later, challenges can present themselves. This is why it is ideal to plan so everyone knows what their responsibilities are. This means having a well-written agreement that places that plan on paper. Having this plan drawn up by a Minneapolis estate planning attorney specializing in real property can address problems before they happen.
Problems A Well-Written Agreement Addresses
There are several topics that co-owners need to address. The first is how property decisions will be made. A cabin may need to be remodeled or a room added. There is also no doubt that repairs and maintenance will be needed. It needs to be established whether or not everyone gets an equal say in the making of decisions.
Some families are able to pass their cabin on to their children with a sum of money designated to cover property maintenance and expenses. When there are multiple owners, they all can contribute monthly to the property and all can decide how the expenses will be paid. Planned collection is a common method of executing the payment of expenses. The agreement should also state whether or not “sweat equity” will result in a credit for labor instead of the laboring co-owner having to contribute the same amount of money as everyone else.
There are many options that need to be considered from how loans will be paid to whether or not a co-owner wishing to sell will be required to sell to the remaining owners. Other areas that need to be considered are:
- Allocating use of the property.
- The setting of ground rules for the cabin (allowing guests, recreational equipment use, supervision requirements for children, doing dishes and laundry, maintaining the law, restocking the refrigerator, etc.).
- How a dispute will be resolved, such as through dispute resolution.
- Events that could lead to a transfer of ownership.
Standalone Agreement Or Trust Provision
It is possible for the agreement to be a standalone agreement or it can be included in the provisions of a trust. A trust is used to keep a cabin or share of a cabin in the family. This is something that your Minneapolis estate planning attorney can draft for you. There are multiple areas of the law that are touched when sharing ownership of a cabin. Business law, estate planning, and real estate law are all involved in the process.
If you do opt for a Trust, then it needs to be flexible. The purpose of a flexible Trust is to allow the family to keep a separate Operating Agreement rather than placing all of the small details in the Cabin Trust document. This document is initially a grantor trust that can be amended (revocable) while the parents are living and of sound mind. Upon the parent’s death, it becomes irrevocable.
The advantages of using a trust include cost effectiveness and the status of a superior estate planning document. This can be a challenge for property management, but is a method of ensuring that property, even when it is shared, is passed down to surviving children as smoothly as possible.
Contact A Minneapolis Estate Planning Attorney
Cabin Ownership Agreements and Cabin Trusts are documents that can effectively help property co-owners manage that property and what happens to their shares of the property when they pass away. If you wish to co-own a cabin with family or friends, it is important to have a formal agreement and to protect your share of the property the way you want it protected. To learn more about what the Krogh Law Firm, P.A. can do for you, call today at 651-631-0500 to request a free consultation.