In 1969, Patrick and Ann Murphy became the proud owners of a lovely cottage on the easterly shore of Pleasant Pond in Bethel, Maine. They spent summers enjoying the peace of being surrounded by nature and dreamed of future generations making memories during their summer vacations and holidays.
Eleven years later, Patrick and Ann followed through on their vision and gave the Murphy cottage in equal 1/7 shares to their seven children with gift deed. That is when the trouble began.
The Murphy family is now celebrating 50 wonderful years of family gatherings and adventures and their great-grandchildren are truly blessed by their legacy. Though, as the current owners make plans to pass their shares to the next generation, they are taking responsible Estate Planning steps and would like other families to learn from their valuable experience.
For starters, had Patrick and Ann had consulted an attorney in 1969, they may have decided to transfer the property through a trust, instead of with a simple gift deed, which would have allowed their children to benefit from a step-up in basis.
Next, as these seven children made their marks on the world, many of them followed opportunities that led them away from home. Their children ended up living in states outside of Maine including New Hampshire, Massachusetts, Maryland and Arizona. This geography led to challenges since there was no formal management agreement in place. The owners relatively close-by in Massachusetts and New Hampshire were able to enjoy the cottage more, but were also disproportionately responsible for the labor-intensive responsibilities of maintaining a seasonal cottage. The more distant owners in Maryland and Arizona questioned why they need to make equal financial contributions to upkeep and maintenance since they weren’t able to spend as much time enjoying the cottage.
Then, in the mid-1990’s one of the siblings passed away suddenly and had not done any estate planning. Along with mourning the tragic loss of their brother emotionally, the extended family had to deal with complex, time-consuming, expensive intestacy proceedings in two states.
To complicate matters further, when four of the children decided to sell off their 1/7 shares, one of the children’s spouses volunteered as an attorney to handle the legal paperwork as a cost-savings favor to the siblings. Unfortunately, down the road minor issues such as missing spousal consent waivers required in Maine jurisdiction had major ramifications, so the family would have been better off doing everything by the book instead accepting the good faith effort of a family member.
When Molly, one of the two remaining owners with a 75% share, arrived at our firm to do her Estate Planning, she wanted to make sure the Murphy cottage would be saved as an important part of her legacy and passed on smoothly to her children and grandchildren. Our firm facilitated conversations with Molly and her brother Matthew, the other 25% owner, to bring their wishes to fruition.
Our firm coordinated with local Maine counsel and family members to run a full title search, execute corrective deeds, and transfer the property into the Murphy Cottage LLC with a clear governance structure.
The Murphy Cottage LLC established terms including:
- Schedule for contributions to the annual budget and a replenishment of the capital fund based on ownership share;
- Decision making guidelines for improvement projects;
- Cottage use rules of conduct to make sure everyone shows respect for the property and its natural setting;
- Fair labor compensation rates for members that have the time, skills and geographic ability to contribute to tasks such as opening and closing, moving docks and boats, and doing major projects such as building a deck, fixing the structural issues and repairing the rotted screen porch;
- Allocation and reservation process for prime weeks and procedure for owners offering their weeks to other family members for an agreed reimbursement fee;
- Succession plan for current owners to designate their direct descendant children as the family branch’s new owner in their individual Trusts;
- Buy-out clause for any owners that are delinquent and are not able to stay in good standing;
- Process for selling shares and option for sale of the entire property in the event that 2/3 owners are in agreement.
Thanks to Molly and Matthew’s efforts, future Murphy generations will be swimming in the pristine fresh water, playing with tadpoles and frogs, fishing for trout off the edge of the canoe, reading books on an Adirondack chair, hiking to the top of Mt. Baker for breathtaking views and drifting off to sleep to the eerie, beautiful calls of the loons.
If you have a summer home that you want to preserve as your legacy, contact us today.
March 15, 2019
Looking at the retirement landscape through a tax lens, where you retire can have a big impact on your spending power and quality of life. This view of State by State Tax Comparisons was created specifically to assist you in your estate plan process.
Consult with your attorney for the best strategy, including moving your assets to a NH trust no matter where you live.
March 12, 2019
There are a host of complicated terms associated with the legal practice of estate planning, but the Donohue, O’Connell & Riley team prides itself on making the process as simple for our clients as we can. Download our free comparison chart to learn if a Will, Revocable Trust or an Irrevocable Trust is best for you here.
February 26, 2019
If you already have an estate plan, then you're off to a great start. If you haven't begun this process yet, now is the time to take the necessary steps to do so. Once your estate plan has been drawn up, it is strongly recommended that you revise and review it every three to five years.
Whether you're here because you've made those initial steps and are staying ahead of the game, or you just don't know where to start, we have you covered. Here's the top ten reasons why you should update your estate plan:
1. New Child or Grandchild
Welcoming a new child to your family is always a joyous occasion. It is also a great time to ensure your estate will benefit and support the next generation.
2. New Marriage
Make sure that your estate will provide for your new spouse or protect assets from your child’s spouse. Even if you are not yet married, you can adjust your estate to benefit your partner.
Feel secure as you transition to the next stage of your life by reviewing your estate plan at retirement.
4. New Laws
Whether or not you plan on moving to a new state, reviewing state laws for regular updates is always wise. In addition, federal laws, including the 2017 Tax Cuts and Jobs Act, continue to adjust for inflation and change over time, so it is important to make sure your estate maximizes the benefits that these changes provide.
5. Expand Your Beneficiaries
Beyond family and loved ones, many clients allocate their estates to benefit organizations and charities that serve their passions.
6. Child Has Reached the Age of 18
Celebrate this important milestone by making sure all your estate documents are up to date and properly recognize your new adult beneficiary. Additionally adult children need Power of Attorney, HIPAA Release and Health Care Proxy before heading off to college, so that their parents can still act on their behalf in the event of an emergency.
7. Divorce or a Death in the Family
It is important to adjust your estate so that assets allocated to former beneficiaries are redistributed to other loved ones.
8. Opening a New Business
Safeguard your livelihood by establishing a business succession plan in your estate.
9. Receiving an Inheritance
If you find yourself the beneficiary of a sudden windfall, be sure to account for your new assets in your estate.
10. The Passage of Time
It is always a best practice to review your estate every three to five years to take into account new life events and changes to the law.
February 21, 2019
Iona Evans, Vincent Savino, Kristin Canty & Joe Donohue
Iona Evans - Exeter Office
Iona joined DOCR Law in August 2018. She is passionate about helping people implement estate planning and legal strategies to maximize long-term results. Iona focuses her practice on advising clients with multiple assets and revenue streams to help them to minimize their tax burden and avoid potential liability.
“I am excited to join DOCR’s team of attorneys and support staff who are experienced and insightful about the estate planning process and beyond. In the few months since I have joined DOCR, I have been privileged to bring my depth of experience to bear to help clients achieve their goals, preserve their investments, and fulfill dreams for their estates, businesses and charitable organizations.”
Vincent Savino - Pearl River Office
Vincent advises clients in both the Pearl River and Warwick offices of the firm. Everyone who meets him appreciates his calm demeanor and depth of experience. In 2004, Vince joined a firm that also offered Estate Planning and Elder Law services and began to develop his focus on Trusts and Estates law.
Vincent came to DOCR because of the firm’s “small town” approach to “big city” problems. Vincent says “The partners here give me the opportunity, and actually encourage me, to provide a unique, personalized experience with our firm.” Vincent is happy to spend more time working with clients to create solutions to situations, as opposed to the “one-size-fits-all” approach that is commonly associated with larger firms. The feedback that the firm receives about Vincent and his approach is overwhelmingly positive.
January 31, 2019