They are often some of the best memories: family gathered together during the holidays or a summer vacation with children playing and adults debating. As children move away how can you keep this meeting spot in the family? For a cabin or remote property who will pay for the upkeep? What happens if no one uses it at some point?
Consider the problems that may arise with an equal gift of real estate to three children and their spouses. Six people must approve of any action. If the time comes to sell the property, one couple might refuse to sign sale documents. This can lead to warring factions that can destroy sibling relationships.
You may want all of your loved ones to have access to and use of a cabin, hunting property or recreational forested land to continue traditions with their children and grandchildren. Limited liability entities are often effective vehicles to avoid conflict. These have an added advantage of protecting assets if a loved one is ever sued. One type is a family limited liability company (LLC).
How can you use a family LLC in estate planning?
Typically, several family members are assigned the responsibilities of making decisions and managing the assets. While the other the family members are members with the right to utilize the property. This reduces the number of people required to approve of a course of action or make executive decisions.
Each family is different, but some initial work to set up a family LLC can reduce conflict down the road. Once the LLC is set up, you are able to transfer ownership to children or grandchildren as you think best.
Are there any other potential benefits?
This vehicle can have tax benefits. You may remain the acting manager, while your children are non-managing members. The value of the interest that you transfer can then be discounted. This is because these interests have less value to a private investor, since they do not carry management rights.
In addition to property, you could also fund an account to pay for upkeep for a number of years before turning over the responsibility to children.
If considering how best to make gifts to children and grandchildren, speak with an experienced estate planning attorney. Depending on your circumstances a LLC or trust may need to be a part of your estate plan to provide appropriate protection of assets and avoid future conflict.