RobRoy's blog

Many Utah families have fond memories of spending time together at a "family cabin." Whether it's up at Sundance, Bear Lake, Heber, Park City, or any other number of beautiful locations throughout the country, a family cabin often is a repository for a wealth of happy memories. Because of these frequently strong sentimental attachments to vacation homes, those who own them often want to ensure that the cabin stays within the family and will continue to be used over generations to keep family members close to one another. However, harmonious use of such properties can often go quickly awry without proper "cottage planning."

What is "cottage planning?" First and foremost, it is recognizing that a family cabin is a much different asset than a typical asset passed on through a traditional trust-based estate plan. Once you recognize that, then cottage planning can focus on designing and implementing a plan for the successful transition of a cherished family vacation property to future generations. If done properly, you can greatly increase the chances that the family cabin will stay within the family and be used for its intended purpose - to maintain and strengthen family relationships.

Unfortunately, many family cabin owners never think about the numerous pitfalls that lurk in the shadows when it comes to passing on the family cabin.

Blog Post by:  Melissa C. Platt, Esq.

The majority of Americans (2 out of 3) don’t have a will, according to a study done by Consumer Reports. So, what happens to the property of all those people who die without a will? Well, Utah (and most every state) has “intestate” laws that say who gets a person’s property if the person died without a will. What if you don’t agree with what the law says? Too bad. What if you have no idea what the law says? Doesn’t matter. Think it’ll be okay if you just tell people what you want done with your property? Sorry, the laws—and not your unwritten wishes—control, even if everyone knew what your wishes were.

“Estates without wills are almost always more difficult, complicated and expensive than those with one,” write legacy expert attorneys Andrew and Danielle Mayoras. So, why are so many people willing to just leave the outcome of their legacy up to the laws of the state—especially when it usually takes a greater emotional and financial toll on their loved ones? I have my list of theories, and towards the top of that list is, “Fear.”

The Deseret News ran an article today discussing one of the most important estate planning strategies for avoiding family fights after a death in the family.  There is a real temptation for people to ignore these issues until it is too late.

Honestly, I don't think anyone really saw this coming. Even the nerdiest of the Tax Law and Accounting nerds didn't think that Congress would actually allow the Estate Tax to be repealed. But Congress has. It's gone!

The Problem

First, the good news: If you (1) have a large estate (over $3.5 M), (2) you live in Utah (where we have no state inheritance taxes), and (3) you die in 2010 and before Congress changes the law, then all of your estate will pass to your heirs/beneficiaries free of Estate and Generation Skipping Transfer Taxes (GSTT), even without planning. Hooray!

Now the bad news: If your estate consists of a significant amount of property that has appreciated above what you originally paid for it

Many of my clients have heard me quip about how Bill Gates and Warren Buffett should be worried beginning New Year’s Day, 2010 because of the large target that Congress has placed squarely upon their backs. Now, to be honest, there is most likely no actual, physical threat to their lives because they have probably done appropriate estate planning. But this quip helps me to illustrate a point about Estate Taxes. On New Year’s Day 2010 – unless something happens within the next few weeks over in Washington D.C. – the Estate Tax or “Death Tax” will go away in a puff of smoke. In other words, as the laws currently stand, any one individual who dies in 2010 owning over $3.5 million worth of property will not have to pay Uncle Sam 1 red cent in estate taxes.

For the sake of illustration, let’s assume that Mr. Gates died “intestate” (i.e. without any wills or trusts in place) and that he wasn’t married.