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Christmas in August & Legacy Planning for Families

By November 30, 2011No Comments

My mom is one of the amazing sort who finishes holiday shopping in August.  It always fascinated me, so of course I tried emulating her. The closest I got was finishing in October.  So what does this have to do with wills, trusts, and estate planning?

Well, 2 parallels exist between holiday shopping in August and legacy planning. The first is obvious – planning ahead for yourself and your family is fiscally prudent. The second parallel is a little less obvious because it’s less about shopping and more about August, the summer vacation season, and family harmony in particular.

Many families go on holiday in the summer and while doing so often select a favorite family get-away spot.  This spot ultimately becomes either a retirement or vacation property loved by all.  As such, parents decide to keep the cherished corner of the universe in the family for the benefit of future generations.

Typically, if there is more than one child, parents will leave the property to siblings to “share and share alike.” But what if the siblings can’t share alike? What if they are geographically spread out over the 4 corners and the property is closer to one than the others? What if they don’t want to share and share alike, i.e., they don’t want to perform the same responsibilities, such as property maintenance and financial maintenance?

One answer would be to place the property in trust and draft terms delegating certain duties to the respective siblings. However, times change and people change, so what we might think our sons and daughters are good at today may not be what they become expert in tomorrow. Consequently, it might be more harmonious and advantageous if parents let their children decide how to manage the property and place the property in an entity with a structured agreement that supplements the trust.

Instead of supplementing a trust, parents may also create a trust that owns such an entity, such as a Limited Liability Company (LLC), which in turn would own the property.  As their lives and circumstances dictate, various family members could hold and move into member positions of the LLC, performing the duties directed by the LLC’s operating agreement, which is similar to a corporation’s by-laws.

Forming an LLC and placing it inside of a trust requires legal assistance. Additionally, estate and income tax considerations should be addressed. However, by placing the property in an entity similar to an LLC, generations can continue to enjoy the favorite family getaway without the fear of an ensuing feud. Well…there may be a feud brewing, but at least it won’t be about the one family member who always has to clean the pool, shovel the snow, or rake the leaves.

Plan ahead and consider the abilities and desires unique to each kid – it’s a great way to shop and a great way to create a legacy.

*Author’s note: Yes, I know “plan ahead” is redundant, but it just sounds so darn good!

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