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Inherited Maine Summer Homes Have Issues

February 09, 2010 - Communication, cooperation and an airtight legal document. That's how many baby boomers and their siblings are successfully managing the camps or cottages that their parents have passed on to them.


When people first started buying little pieces of Maine as vacation retreats back when the invention of the automobile made having a second home possible, a little piece of Maine heaven was affordable to many. In the early 20th century a few thousand -- maybe even a few hundred -- dollars could buy happiness, in the form of a camp along the lake, or cottage upon the shore.


Most of those camps and cottages have rocketed in value, especially if they are on the water. For boomers who want to keep the summer places they love so much, that means facing annual property taxes that may exceed their parents or grandparents original purchase price. Plus, there is maintenance and repairs. And when a boomer has siblings, problems could result when it comes to deciding how to own and operate the place.


Attorney Peter Plumb of Murray Plumb and Murray in Portland has worked with many families dealing with this situation. When it comes to a place that evokes years of fond memories, "emotions tend to run a very high," says Plumb.


Plumb sees his role is that of a mediator. When deciding how to manage a family property, there are three components to examine, he says.


First is ownership. In most cases a summer place has come down from two or three generations, which means there may be several heirs or descendents interested in assuming ownership. Plumb says his general recommendation is that if the ownership will be passed on to more than three or four owners, it is best to consider forming an LLC (a limited a liability company).


The second issue is deciding about the governance of the ownership structure, whether it's an LLC, a corporation or a business trust. The question is, "How is this going to be operated?" Plumb says. The owners must decide how bills will be paid, and how maintenance and repairs will be handled. Families may also need to make decisions about whether to generate rental income, and if so, how that is to be handled. With a formal, legal ownership structure in place, these questions are not left to chance.


The third area that families need to look at is how they will transfer ownership in the future, plus an exit strategy should someone want to leave, Plumb says.


While members of a family might think they can work things out amicably between themselves without legal tools, the reality is, there's risk involved when there are multiple owners and no formal structure, Plumb says.


"If you don't put it (ownership) in a single entity, in a situation with multiple owners, the Maine statutes allow for the right of every owner to have a partition," he says. That means if one owner is in disagreement with others regarding management of the property, he or she has the right to go to court and ask for a partition, a legal process that could result in the court ordering a property to be divided or sold.


Pam Thompson of Kennebunkport and her three siblings, who lived in-state and out and range in age between 56 and 64, were proactive when it came to deciding the future of their family's beloved summer cottage in Port Clyde.


Thompson's grandparents, of Medford, Massachusetts, bought the oceanside house with 25 plus acres around 1907. The place was left to Thompson's mother in the 1950s. In 1980, she and her two sisters and brother purchased the house and formed a Chapter S Corp., which provides shares to the owners. Her parents, who have since passed away, were given a life tenancy in the house, and for nearly 20 years they lived their year-round.


Now the clan divides up vacation time there. They have an annual meeting, where they review the budgets, maintenance and repair issues and anything else that may have come up over the year. Some income is derived from user fees, which includes the fees family members pay when they use the house. Shares in the corporation can be passed along only to direct descendents.


The arrangement has worked out very well, without conflicts, Thompson says. She says it is because all four siblings have the same feeling about the property.


"You have to have a family that has the same mission, and ours is to keep the land and house intact without developing it," she says. "This is a legacy we would like to keep intact."


Like Thompson's family, Denise Bougie of Sanford and her two sisters want to keep the Wells Beach cottage their parents had bought in the 1970s in the family.


Because their parents, who split their time between Florida and Maine, where using the cottage less frequently as they got older, the sisters created a trust and purchased the house five years ago. They created rules for operating in using it, and they divide management and maintenance tasks between them. The family actively seeks renters throughout the year, to help defray tax and maintenance costs.


Bougie says she and her sisters came together to do this after her parents began talking about selling it.


"We were heartbroken," she says. "The cottage always brought us together."


She and her sisters are realistic about the future of the cottage and have provisions should one person want to sell out to the other owners, if necessary. They also realize, that should the ownership be a burden for descendents, "there might be a time when will have to sell", she says.


For now, however, with their legal arrangement working for them, the sisters are happy to continue having summer get-togethers at their family cottage when they can.


"It brings us together," she says. "We have a ball."



Maine Sunday Telegram, February 7, 2010 article by Nancy McCallum


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