If you own a vacation home, and would like to keep that home in the family after you pass away, you have a variety of options to choose from. You might opt to directly transfer the property to your children upon your passing away, but this is rarely the best option. Your children would own the property as tenants in common, which is rarely conducive to effective property management (or to good sibling relations) over time.
Another option is to put the family cottage into a trust. This option may avoid some of the potential pitfalls of direct ownership by tenants in common. There are three main reasons, however, why a Family Cottage LLC is probably a better option than a trust:
- LLC management is usually more democratic than trust management, which can lead to more harmonious relations among your beneficiaries.
- If a claim for damages is made related to the vacation property, a trust may offer your beneficiaries less protection from personal liability compared to a LLC.
- The Rule Against Perpetuities mayt dictate that your a trust cannot last more than about 90 years. A LLC, on the other hand, has a potentially unlimited duration.