The idea of a family cottage where everyone can hang out together and share the cottage time with their families is always a great plan. Too often, disputes arise when families try and “relax” together. Does this sound familiar?
There are more legacy type of issues with the cottage than with any other asset in the family. Everyone has such fond memories, great times together that make for multi-generational stories. All the memories are usually good ones when Mom and Dad are around to be the “Mediator” and the “Banker”. What happens when they are not around anymore?
In guiding family business owners with their succession journey one of my first intake questions is, “Do you have a family cottage?” If the answer is YES, then we need to have a chat and explore what things will look like when you are no longer able to be the CEO of the cottage.
I usually hear, “Oh the kids will work it out”. Having had to mediate on these issues, I have developed a new philosophy regarding the family cottage:
Sell it before you pass away, or deem it to be SOLD in your will, or have it placed in a Family Trust with the funding mechanism to sustain it for a very long time.
People ask me why I am so harsh regarding the cottage. Here is why:
- The value of the property is probably so high based on recent trends, that it represents a large proportion of an estate. What was bought for $100,000 30 years ago could now be worth well over $1,000,000 today? It is too valuable to take a “wait and see” approach.
- The conflict around who pays for what in a cottage, that is now shared by siblings and their families? A new roof? a new boat? boat repairs? dock installation? gas in the boat?What is a capital expense versus a consumable and why does this matter?
- Who sets the schedule for use in our limited season?
- All family members often do NOT use the cottage to the same extent. It is fair to say some may like it more than others.
These questions are endless but in most cases will lead to a dispute amongst family members. It can be avoided! If keeping the cottage in the family is the only option, then you have to be proactive.
How Do We Avoid These Challenges?
One of the best options is to have a family retreat that is facilitated by a third party (hey, I do that!) and openly deal with all of the issues that will arise in shared ownership.
Flush out the potential conflicts early and find the solutions to the issues before they become issues!
By bringing the family members together with spouses and hopefully Mom and Dad, we can be collaborative, proactive and prepare for a successful season on sharing the cottage and all that it entails.
If dealing with the cottage as part of an estate issue (upon death), those siblings who do not use the cottage and have no desire to participate in ownership, can be bought out of their share at market value taking you one step closer to family harmony.
Cottage season is upon us. I wish you a great season of making memories and being safe. Be proactive and talk about the cottage and its future while things are going well.
If you have any questions as to how to get started in having these conversations, please reach out to me as you know I would be more than happy to help!