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Cottage Law: Holding onto Family Treasures and Memories 


Summer is over.  Your cottage - at the Cape, on the lake, in the mountains - is about to be closed up for the winter.  You are left with those wonderful lingering memories of the kids visiting, the grandchildren playing in the water or marveling at the quiet night, the intimate family conversations.  You would like to give these special summers to your family for years, or generations, to come. However, if that is really important to you, you have to plan for it.


I frequently work with clients who own places on Martha's Vineyard and on the Cape.  It is nearly every client's dream to keep the cottage in the family.  Based on my experience over the past 36 years of practicing law, there are a number of options to consider that can improve the likelihood that your cottage will bring family happiness, rather than family discord, in the future.



Leaving the Cottage to the Kids


Many of my clients begin by telling me that they simply want to leave the cottage to the kids, period.  "They'll work it out," is the familiar refrain.  However, there are several things to consider:

  • When one of the children dies, who inherits that child's share?  Does it get divided among the grandchildren?  Does it go to the child's spouse?  Does it go back to the other children?  Can the child give it to someone else in his will?  By giving each child a share of the property, you are simply hoping that all these questions will be "worked out" later.  Often, they are not.
  • If each child owns a share of the cottage, then anyone with legal claim against that child can file a legal claim against that share.  The claimant could be the child's creditor, a disgruntled spouse, or an injured person from a car accident involving your child.  Those claims could force a sale of the cottage.
  • If all the children own the cottage together, then every decision about the cottage has to have unanimous approval.  These decisions might include whether or not the cottage should be sold, to whom, for how much, and on what terms.  If decisions cannot be worked out, the only alternative would be for one or more of the children to file a "petition to partition" with a Massachusetts court; a process that would force a sale of the property, cost everyone significant legal fees, and cause incredible family acrimony.
  • If one of your children needs to qualify for a government benefit program based on the assets he or she owns, or if the child is applying for financial aid for his or her children, the child's share of the cottage would be an "asset" that might affect eligibility.

There are options to address these concerns.  The most common is to create a trust to own the cottage for the benefit of your children, grandchildren, etc.  A second option is to create a limited liability company (LLC) or a family limited partnership (FLP).  In either case, you could retain control of the entity until you die, which would allow you to decide now how decisions will be made later.  The trust can deal with all the questions posed above, such as determining who gets the share when the child dies, protecting the share from the child's creditors, determining how and when to sell the cottage, and allowing a child to qualify for government benefits.



Nursing Home Considerations


As you age, you may need nursing home care.  In order to qualify for MassHealth (the Massachusetts name for the Medicaid program) to pay for your nursing home care, you must have very minimal assets.  Your cottage will disqualify you.  In order to qualify, the cottage will need to be sold, whether it is in Massachusetts or out-of-state, and then the proceeds will be spent on your nursing home care before you can qualify.  That would be a shame, because your goal is to keep the cottage in the family after you die. 


What can you do?  A solution can be to convey the cottage to a third party, such as one or more of your children, an irrevocable trust, or an LLC.  As long as the Trust or LLC contains the necessary provisions, the cottage will be protected five years after the transfer.



What if Your Child (or Grandchild, or Great-Grandchild) Wants Out?


Iknow of no greater source of disharmony among siblings than the issue that arises when one child, who is not using the cottage or simply needs the money, wants to cash out and the others do not.  First, there is a question of valuation.  To the seller, the cottage is invariably worth much more than the other siblings believe it to be worth.  Then, there is the question of the payment.  The value of even a share of a cottage could be hundreds of thousands of dollars.  Could the children who want to keep the cottage afford to pay the purchase price or come up with that kind of money?  Could the child qualify for a mortgage on the cottage to purchase the share?  What typically happens in these situations is that the problem festers and eventually the cottage gets sold, exactly what you did not want to have happen.


While there are a number of solutions to this problem, the main objective is to pick the solution now, while you are living, before the problem arises.  Common solutions are:

  • Agree to the method to determine the value to be used in any buyout situation.  It may be to get an appraisal of the fair market value at the time of sale, use the assessed value, or do a combination of both.  Whatever you pick now will determine the process so that the value for sale cannot be disputed later.
  • Apply a discount to the share of the child seeking to cash out.  When you leave the cottage to your children, you are not leaving them an investment vehicle but rather a treasury of memories and a place to create new ones.  If, for whatever reason, a child (or grandchild) decides not to be part of that very special place, that decision should not be the precipitating event that ruins the present and future memories of others.  You may decide, therefore, that someone seeking to cash out will receive only a percentage of the value of his or her share.  The main objective is to establish that rule now, preferably with input from your children, before the issue ever becomes a reality for them.
  • Determine how payment is to be made.   You could require that the payout be made (usually with interest) in monthly or yearly payments over five to ten years, or longer.


As you can well imagine, there are dozens of other decisions to be made concerning the management of the cottage.  This article covers only some of the main issues.  But, unless you deal with the big issues, the management decisions will become irrelevant.  Your cottage can be an incredible gift to your children and grandchildren. However, the gift will be worth immeasurably more if it does not come fraught with problems that you can solve by planning ahead.


Trusts and Estates Group


Mirick O'Connell

100 Front Street

Worcester, MA  01608

t 508.791.8500

f 508.791.8502


1800 West Park Drive, Suite 400

Westborough, MA  01581

t 508.898.1501

f 508.898.1502




Mirick O'Connell is a full-service law firm with offices in Worcester, Westborough and Boston, Massachusetts.  The Firm's principal practice groups include Business; Creditors' Rights, Bankruptcy and Reorganization; Elder Law; Family Law and Divorce; Intellectual Property; Labor, Employment and Employee Benefits; Land Use and Environmental Law; Litigation; Personal Injury; Public and Municipal Law; and Trusts and Estates.
This client alert is intended to inform you of developments in the law and to provide information of general interest.   It is not intended to constitute legal advice regarding a client's specific legal issues and should not be relied upon as such.  This client alert may be considered advertising under the rules of the Massachusetts Supreme Judicial Court.