Seminar Helps Families Learn Ways to Transfer Real Estate Ownership

Passing down cabins to the next generation doesn't need to be stressful.

Lowell Campbell remembers driving around the “middle of nowhere” as a boy with his parents, looking for a bucolic spot for a cabin. After they bought some land in the 1950s, Campbell helped his parents build their northern Minnesota getaway. He’s been tinkering with it ever since.

“As far as my mind tells me, I’ve always been up there,” says Campbell, a former longtime resident of Chanhassen. Campbell, who now owns the cabin with his wife, is pondering what to do with it in the future. He says his children want to keep it in the family. “But will they be able to afford it 30 years from now?” he says. “We don’t want to burden them with more than they can handle (financially and with their busy lives).”

Such concerns are common in Minnesota, where cabin culture is a way of life. That explains why enrollment in a community education seminar called Keep the Cabin in the Family is booming. Financial advisor Kurt Obermiller travels the west metro—including to the Eden Prairie and Eastern Carver County school districts—teaching people ways to keep their cabins in the family without creating family battles. An attorney versed in estate law often accompanies him to the seminars.

“You can divide the money, you can divide assets but what do you do with the cabin?” Obermiller says. “[Attendees wonder] what to do. ‘The kids want the [cabin], but how do I get it to them?’ or ‘What’s it going to cost me to do it? And what it’s going to cost them?’"

Before answering those oft asked queries, Obermiller asks attendees to consider, “Why do you own a cabin?” It usually comes down to memories. “If we’re going to try to transfer this cabin to your kids, we want to keep those memories intact,” says Obermiller, working for Innovative Income Strategies. To prevent conflicts, Obermiller suggests cabin owners first ask their children if they want the cabin to remain in the family. If so, explain to them how much it costs to run and upkeep lake property. (Don’t forget to include the tax bill!)

“What are you doing to the family unit if you give this to them, and now they have to fill the propane tank, and it’s $2,000, and they have to come up with $500 each?” Obermiller says, exaggerating a bit to make his point. “What if one of the children can’t afford to do this, so the other three start paying for it? What happens to the relationships then?”

Once the financial picture is fully explained and the decision is made to keep the property with the family, attorney Steve Ledin says there are two prevalent ways to transfer a cabin—placing it in a trust or setting up a limited liability company (LLC). Through a trust, a trustee is in charge of administering the rules. An LLC converts the cabin into a corporate entity that owns it.

“With an LLC, we’re establishing a democracy,” explains Ledin, of Ledin Law in Lake Elmo, who has accompanied Obermiller to seminars. “If we have four kids, we decide three out of four make decisions (on the cabin’s uses). The trust has a trustee, so that’s a dictatorship. You pass the cabin to a trust, you name one or more trustees, and the trust manages and owns the cabin to the benefits of the next generation.”

A cabin can also be directly transferred to another owner, too, but there is no built-in way to handle disputes. So, which route is best? It depends on each circumstance. Obermiller says he has never seen two estates that are the same. “My wife says I should have been an educator,” Obermiller says. “I want people to have the power to know what to do.”

Campbell and his wife are mulling their options after attending a similar seminar.

“We’ll decide the right way, finding out how it will affect the kids,” he says. “We’ll get their input, see what they can and can’t do.”

For more information on his seminars, call Obermiller at 612.889.4979.