Blog — Family Business

Wednesday, September 25, 2013

One of the challenges I often encounter in my practice, particularly in cottage succession planning and family business situations, is that clients tend to focus on how things work in the present. They assume that present methods of management, problem-solving, payment of expenses, use of the family cottage and how ownership interest would be transferred will work the same way in the future. That is a risky assumption.

To expect that the next generation(s) of owners will maintain the same types of relationships, communication styles and cooperative efforts that the current generation enjoys is wishful thinking. That fact, together with factors that impact people’s lives such as...

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Wednesday, September 11, 2013

Insurance coverage is an important item to be addressed with respect to Cottage Law and Cottage Succession Planning. Every cottage has insurance to cover risks of loss due to damage of property and liability to individuals who may be injured on the premises. Insurance coverage is extremely important and, in most cases, is required by banks or lenders that hold the mortgage on a cottage or vacation property. So the question becomes, “What should an individual or family engaged in a cottage succession plan do with respect to their insurance coverage?”

The first thing to do is to contact your insurance agent and explain the type of succession plan you have chosen, so he/she...

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Wednesday, September 4, 2013

Transfers of Ownership and Property Tax Uncapping
As a general rule, when there is a transfer of title of property in Michigan, the value of the property is "uncapped" and increased for the assessment of property tax. This results in a significant increase of property taxes, oftentimes to the point that the next generation of new owners in a family cannot afford to keep the family cottage.

In the past two weeks, I’ve discussed in my weekly blogs two "exceptions" from the transfer of ownership rules.[1] These exceptions provide the opportunity for parents to transfer ownership of property to their children in...

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Monday, August 26, 2013

A common concern among parents wishing to transfer ownership of cottages and other legacy-type residences to their children is the "uncapping" of real estate taxes that occurs upon transfer of ownership. The general rule is that as long as someone owns real estate, the "taxable value" of the real estate remains "capped" and increases only incrementally against a statutory capped amount on an annual basis. However, when there is a transfer of ownership of the property to another party, that transfer typically results in an uncapping of the property's value to a much higher fair market value for assessment of property taxes. A transfer of property from parents to their children upon...

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Sunday, August 11, 2013

The Michigan legislature recently added an exemption to the definition of "Transfer of Ownership" under the uncapping provisions of the General Property Tax Act. The new law provides that beginning December 31, 2013, transfers of residential real property from a transferor to a transferee who is related by blood or affinity to the first degree are not "transfers of ownership" and do not "uncap" the taxable value of the property provided that the use of the property does not change following the transfer. (MCL 211.77(a)(7)(s))

It is important to note that any previous transfers already completed from parents to children or from parents and/or children to trusts or limited liability...

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