November 29, 2021

Volume XI, Number 333

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Cottage Planning: Dealing with Estate Taxes, Part II

Part 1 of our "Dealing with Estate Taxes" blog addressed the use of a qualified personal residence trust (or "QPRT").  But using a QPRT only works in certain situations and requires a settlor to willingly give up the cottage at the end of the QPRT term. 

An alternative estate tax minimization strategy involves the use of a limited liability company.  By creating and transferring the cottage to an LLC, an owner can gift membership interests to her descendants through unrecorded assignments.  This is easier (and less confusing from a title standpoint) than recording deeds each year.  Moreover, this method of gifting allows an owner to get the next generations involved in the use and management issues related to the cottage without actually giving them direct ownership of the real estate itself. 

Some care is necessary regarding the amount of the interests transferred to avoid an inadvertent uncapping of the real estate taxes.  Nevertheless, using LLC interests for gifts to accomplish estate tax planning objectives can be beneficial from a tax standpoint as well as a long-term management standpoint.  Moreover, using a cottage LLC can assist with the long-term management of the cottage as well.

Cottage Planning: Dealing with Estate Taxes, Part II

© 2021 Varnum LLPNational Law Review, Volume II, Number 206
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About this Author

Christopher J. Caldwell, Estate planning lawyer, Varnum
Partner

Chris is a partner and leads Varnum's Estate Planning team. Chris is acutely aware that advising clients on estate planning and wealth succession requires an intimate understanding of the client's goals, hopes, desires, and concerns in order to accurately prepare an appropriate plan. As such, he works intimately with clients and their advisors to create estate plans that enable families to plan for today as well as for future generations. Chris regularly prepares sophisticated estate plans, emphasizing probate avoidance, estate tax planning, and business succession...

616/336-6951
Laura E. Radle, estate planning attorney, Varnum
Partner

Laura is an attorney in the firm’s estate planning team where she helps individuals and families to identify their estate planning goals and to create a plan that is tailored to meet their specific needs. Laura’s practice includes a full range of estate planning and estate settlement services including the preparation of basic or complex estate plans, tax planning, business succession planning, cottage planning, charitable gift planning, and estate and trust administration services.

As a member of the Family Business Team, Laura assists business owners with the...

616/336-6415
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