Similar to other new parents, my husband and I were a bit overwhelmed with all of the things we needed (or wanted) to do to prepare for his arrival including, getting the nursery ready, shopping for baby clothes and other baby essentials, reading parenting books and attending classes, and getting our financial and legal house in order. As you can imagine, getting our financial and legal house in order was not at the top of our "to do" list. Not because it was not of the utmost importance, but because it was not nearly as enjoyable as some of the other items, like shopping for cute baby clothes. Despite this, prior to Jack's arrival we updated our estate planning documents to include, among other things, the nomination of a guardian and conservator for him in the event that my husband and I were unable to care for him. We also met with our financial advisor to put a financial plan in place. There are so many things to do to prepare for the arrival of a child, but getting your financial and legal house in order is essential.

The below link is to an article by Tara Siegel Bernard entitled "For Parents-to-Be, a Few Financial and Legal Tips," published in the New York Times on March 8, 2013.  This article provides a nice outline of some of the important financial and legal considerations prior to becoming a parent.  I hope that you will find Tara's tips as useful as I did!

For Parents-to-Be, A Few Financial and Legal Tips by Tara Siegel Bernard

Clean up
Start by clearing your yard of dead branches and foliage. Pick up any trash or remnants from winter storms and rake up any dead leaves.

Weed
Now's the time to rid your lawn and flower beds of any weeds. Once you've gone through your yard and have done a full post-winter clearing of weeds, be sure to check weekly and spend a few minutes pulling any new weeds that may have appeared.

Make a plan
If you're working with your landscape for the first time, or if you are redoing your existing landscaping, make a plan before heading off to the home improvement or local greenhouse – determine what you will want to accomplish and what you might plant in your yard to achieve that plan. It's okay if gardening isn't your thing, hiring a landscaping professional just might be part of your plan in that case. (Don't forget to set a project budget!)

Fertilize
Fertilize your grass, shrubs and flowers. If your landscaping plan includes herbs or veggies that will be consumed, you may wish to consider using an organic fertilizer that is free of pesticides.

Check equipment
After months of non-use, you'll want to make sure all of your equipment is functioning properly. Does your lawn mower work? How about your irrigation system? Whether you use a hose-attached sprinkler or an in-ground system, you'll want to be sure that it's still in working condition after the winter. If you utilize an in-ground sprinkling system, be sure to check the pump and tank as well as the sprinkler heads.

Mulch
A fresh layer of mulch can brighten up your landscape and a four inch layer of mulch on top of the soil can help prevent weeds as well as help your plants retain moisture. Pulling the mulch up around the base of your shrubs and plants will help the plant's root ball hold in moisture.

Getting an early start to caring for your cottage property in the spring will ensure that you have several beautiful months of outdoor enjoyment ahead of you. Happy landscaping!

In the seminars, we'll address how the new estate tax law will affect your estate plan and how you can simplify your current plan based on these new laws. Registration is still open – we hope to see you there!

Seminar Dates & Locations:

2/26/2013, 2 p.m. - Caledonia
2/27/2013, 10 a.m. - Cascade
2/28/2013, 10 a.m. - Rockford
2/28/2013, 7 p.m. - Grandville
 

Although this bill is a win for cottage owners, it fails to address the issues discussed in our previous blog regarding the impact of this bill on properties that are owned by or transferred to a trust. In addition, the bill does not address the concerns regarding the future management of a cottage, which many times will outweigh any tax concerns of a cottage owner. 

A complete cottage plan should address concerns related to both taxes and the ownership and management of the cottage by the next generation. We would be happy to help your family to create a complete cottage plan!

Well, it depends on how the LLC is structured.  If the LLC is structured as a member-managed LLC, all of the co-owners (who are now called "members") will be involved with each and every decision related to the ownership and management of the LLC.  However, if the LLC is manager-managed, a manager will make many of the decisions related to the ownership and management of the LLC. 

For owners who want to maintain a large degree of control over a cottage, he or she can do this by acting as the manager of the LLC.  It should be noted, however, that if other family members are given membership interests in the cottage, those family members might still have a say in certain decisions related to the cottage (for example, perhaps a majority or super-majority of the members can remove the manager).  The provisions of the Operating Agreement will determine how much say the members of the LLC will have in decisions related to the ownership and management of the cottage.   

Although it may be difficult for an owner to cede some or all of the control over the decisions related to a cottage, in some cases, ceding control is beneficial because it allows the next generation to learn about and understand the intricacies of managing the cottage.  In other cases, however, the owner might want to retain control with an iron fist.  If so, the owner should act as the manager of the LLC and provisions should be included in the Operating Agreement to restrict the ability of the members to make various decisions (including the ability to remove the owner as the manager).

As we have stated before, each family is unique.  Therefore, a cottage plan must be tailored to fit a family's specific needs and desires.  This is where we come in.  We would be happy to speak to you further about the best way to tailor your family's cottage succession plan.

The foundation to your personal financial plan is a Personal Balance Sheet. This document, which includes an inventory of your assets as well as your liabilities, can be the first step towards financial well-being. One of the significant assets on your balance sheet may be your family cottage. The source of those wonderful summer memories can also present some challenges—scheduling, allocation of expenses, whether pets (or renters) should be allowed, etc. Chances are you are also concerned about:

• Financial and estate planning
• Minimizing property taxes
• Planning for estate taxes
• Keeping the cottage in the family

Protecting the family cottage—and preparing the next generation to own and manage it in the future—means taking the initiative now. Plante Moran Financial Advisors and Varnum will hold a free seminar on cottage law planning as a part of your larger financial plan. This short, information-packed seminar will help you determine what you need to do to ensure the best outcome for your family-owned cottage.

Join us on Thursday, November 8, at the Watermark Country Club in Grand Rapids.  The seminar is free, but space is limited, so reserve your seat on-line at www.varnumlaw.com/cottage or call 616-336-6500.

Even after PA 297, Part 353 still requires property owners to obtain a permit for building new structures or additions to existing structures, driveways, garages and the like in critical dune areas.  Moreover, building on a steep slope (a slope within a critical dune area that is steeper than a one-foot vertical rise in a three-foot horizontal plane) requires the MDEQ to issue a special exception.  To obtain a special exception, the property owner must show a practical difficulty will occur if the special exception is not granted, and the MDEQ must determine that significant damage to the public interest on the land will not occur.  In addition, the construction on the first lakeward facing slope of a critical dune area or foredune will not be allowed unless the property was a lot of record recorded prior to July 5, 1989, and the property does not have sufficient buildable area landward of the crest to construct the dwelling or other permanent building proposed.  PA 297 made these standards much less stringent than before, but they can still create problems for a property owner. 

An owner must also determine whether his or her property is located in a high-risk erosion area.  If so, then additional regulation under Part 323 of the NREPA (shorelands protection and management) will apply.  Part 323 imposes a required setback distance on the property.  Permanent structures must be constructed landward of that setback.  The setback distance varies depending on the height of the bluff, the projected recession rate of the dune and the steepness of the slope of the bluff.  Construction specifications can also be regulated depending on Part 353 requires property owners to obtain a permit for building new structures or additions to existing structures in critical dune areas.the proposed location of the structure.  Part 323 can also apply to additions or remodeling of permitted or grandfathered structures even within the existing footprint.  The MDEQ has maps of high-risk erosion areas.  Owners should check such maps if they do not know whether their property is covered by Part 323. 

Owners must beware that many sand dune properties contain wetlands in the swales that are landward of the sand dunes.  If these wetlands are five acres or more, or are located within 500' of a lake, pond, river or stream, then they are regulated under Part 303 of the NREPA.  In such case, the owner must obtain a permit to dredge or fill the wetland as might be needed for driveway crossings and the construction of structures. 

Finally, many lakefront communities contain special zoning restrictions that apply to lakefront property.  Several contain setbacks from the ordinary high water line regardless of whether the property is in a critical dune area or a high-risk erosion area.  Others contain setbacks that are based upon the location of structures on either side of the property in question. 

In short, while PA 297 should greatly facilitate construction within critical dune areas, this does not mean that lakefront property owners are necessarily out of the woods.  They need to check other state statutes and local ordinances that may regulate construction on such property.

House Bill 4753, passed by the Michigan House of Representatives and currently pending before the Michigan Senate would allow a parent to pass residential real estate directly to a child without an uncapping of the taxable value. The result would be that in those instances, a sudden increase in property taxes may not force a sale of the cottage.

Of note, however, is that as proposed, the bill would not be effective until December 31, 2013.  Perhaps more concerning is what the language of the bill doesn't address: what if property is in a revocable trust and passes to a lifetime trust for a child?  Is it still exempt from uncapping?  In many cases, this lifetime trust planning is used for important reasons unrelated to property taxes. Avoiding the potential uncapping in this manner may also prevent cottage owners from carefully considering proper cottage succession planning.  For example, owners may avoid an uncapping, but without any planning for the future of the cottage, are they setting their children up for a dispute in the future?

Stay tuned for more information on the future of this legislation and the questions it may create.