Funeral & Estate Planning

Estate Planning 101 for the family camp

Posted March 05, 2014, at 9:44 a.m.
Nathaniel S. Putnam, Esq. is an attorney with Eaton Peabody.
Courtesy Photo
Nathaniel S. Putnam, Esq. is an attorney with Eaton Peabody.
For the many Maine families that own camps on lakes or other waterways, how a camp’s ownership will be transferred to future generations should be included in estate planning.
For the many Maine families that own camps on lakes or other waterways, how a camp’s ownership will be transferred to future generations should be included in estate planning. Buy Photo

Many families have the good fortune of owning a vacation property or “camp” near one of Maine’s countless lakes, rivers, or other scenic destinations. A camp has often been in the same family for multiple generations and serves as the connection that solidifies relationships between siblings, cousins, and more distant relatives.

From an estate-planning standpoint, the manner in which a camp is passed from one generation to the next can make or break these relationships.

Camp owners need to consider the consequences of transferring ownership of the property to their children. In Maine, there are two ways people can own property together:

• One is called “joint tenants” or “joint tenants with rights of survivorship.” When one joint tenant dies, the survivors own 100 percent of the property automatically. The deceased owner’s children do not inherit their parent’s interest. If children own a camp as joint tenants, whichever of them lives the longest will be able to leave 100 percent of the camp to his children.

• On the other hand, if the children own the property as “tenants in common” — the other form of shared ownership — each child can leave his interest to his children when he dies.

Other concerns exist when multiple family members own a camp together, regardless of what form of shared ownership governs. Many do not realize that when one or more people own real property together, each owner has a right to force a sale of the property through a process called “judicial partition.”

This can cause problems when one owner has less of an attachment to a camp than the other owners do. Consider a camp that is transferred to three children, two of whom live in Maine and use the property frequently. The third child, however, moved to California years ago and has never returned to Maine. If this child would prefer to have his full inheritance in cash, he can force the liquidation of his interest in the camp through a judicial partition. If his siblings cannot afford to buy him out, the camp will likely need to be sold to a third party.

Shared ownership can generate conflict over other issues, such as scheduling usage and sharing maintenance costs. If a camp is not large enough to accommodate all of the owners and their families, who gets to use the property over holidays like the Fourth of July? Should an  owner who uses the property the most pay a greater portion of the taxes and insurance? What if an owner refuses to pay his share of the maintenance costs? What recourse is there against an owner that always leaves the property a mess?

Fortunately, many of these issues can be resolved by using an ownership vehicle for a camp such as a trust or limited liability company. Camp owners should consult with a qualified estate-planning attorney to explore these options. With some advance planning, camp owners can ensure their property will be available for the use and enjoyment of generations to come.

Nathaniel S. Putnam, Esq. Is an attorney with Eaton Peabody.

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