Cabin succession planning is the process of creating and implementing a legal structure designed to maintain family lakeshore property with multiple owners through multiple generations. It can be a complex undertaking, particularly when the plan requires consensus-building among a large group of family members.
Typically, the process uncovers hot-button issues that become roadblocks to planning. Those can include: financial contributions from family members, buy-outs and opt-outs, decision-making and governance, succession of ownership and dividing property.
Families can use mediation to find creative solutions that address all family members’ concerns and prevent hurtful conflict in the future. However, cabin succession planning mediation differs from traditional lawsuit settlement mediation. It is important family members are prepared for what can be, at times, a difficult discussion.
Often, when the parent generation is initiating the cabin succession plan, they wish to pass the cabin down to their children and grandchildren along with an endowment fund for covering the expenses of maintaining the property and recreational equipment. If there is no endowment, a process must be established for collecting money from each owner or user of the cabin property. The issue of financial contributions can become a roadblock as family members struggle with issues of fairness:
- How should the annual fee be determined?
- Is it based on ability to pay or frequency of use?
- What if a family member cannot or does not pay?
- Who becomes the family collector?
Buy-Outs and Opt-Outs
A key decision in creating a cabin succession plan is whether the lakeshore property should be considered a financial asset or a sentimental one. If it is a financial asset, an owner of the property should ostensibly receive some remuneration upon selling his or her interest in the property (a buy-out). If the property is being passed down to preserve a sentiment or legacy, then the plan is often structured so that a departing owner receives no immediate financial benefit (an opt-out). Family members frequently have different views on whether a buy-out or opt-out is appropriate, and how to set the terms:
- What is a fair purchase price?
- Should the purchase price be discounted? Can it be paid over time?
- What if the buyer defaults?
- If someone opts-out, how will the other owners bear the financial burden of the property?
- What if the property is later sold? Should an opted- out owner participate in the sale proceeds?
Decision-Making and Governance
A common thread among cabin succession plans is creating a governance structure that will streamline operations and decision-making related to the lakeshore property. The larger the ownership pool, the more crucial a representative system of governance becomes. Family members will need to categorize the types of decisions and determine who will have authority to act:
- Should there be a category of “substantial decisions” – such as whether to make a large improvement or sell the property – that require a vote of all owners?
- Should there be a second category of “annual decisions” – such as setting the budget – that can be made by a representative group of family members?
- Is there a third category of “day-to-day decisions” – such as arranging for dock installation and cleaning - that can be made by designated family managers?
- What happens if an owner disagrees with the decisions made?
Succession of Ownership
A transfer of ownership from one parent generation to the next generation can be a relatively simple undertaking. The succession of ownership from the child generation and beyond, however, can be a source of contention for family members:
- Should spouses of the child generation be eligible to become owners after the death of the child? If so, what if the spouses remarry?
- Should there be a second class of ownership for spouses and younger family members?
- Do the other owners have the discretion to “upgrade” or “downgrade” a spouse’s or grandchild’s ownership interest?
- If so, how can the family ensure that this discretion will be exercised fairly?
In some cases, the lakeshore property is capable of sustaining multiple generations of owners as one parcel. For other families, once ownership becomes spread among too many owners – cousins and second cousins – it may make sense to divide the property so that each family branch can own and operate its own lakeshore parcel. Dividing lakeshore property can be challenging:
- What if one proposed lot has more lakeshore than the other lot?
- What if the cabin on one lot is newer than the cabin on the other?
- Should dollars exchange hands among family members to equalize the split?
When roadblocks arise in the cabin succession planning process, the drafting attorney can act as facilitator. This usually involves gathering input from family members, identifying the hot-button issues, laying out legal options, and allowing the family members to work through the decisions together.
In many cases, cabin planning discussions strike chords that are related to deeper issues of fairness in the family system. If family members become entrenched in their respective positions or unable to make decisions in a healthy manner, it is appropriate to engage an expert whose role is to help the family reach consensus.
Mediation is a structured process in which an impartial person facilitates the participants’ negotiation. It is an effective means for family members to work through their issues and create durable and do-able agreements. The mediator helps the participants define the agenda items, identify their needs and interests, listen fully to each other and articulate their ideas, and ultimately to reach mutually agreeable solutions. In addition to making decisions about the legal structure for cabin ownership and operation, participants may cover topics with each other that will increase the likelihood of peaceful coexistence going forward:
- What are the connections to, and hopes for, the property?
- How do the family members imagine using it in the future?
- Are there past problems which could be worked out now in order to prevent recurrence?
- How will family members communicate with each other?
- How will family members handle future conflict over the property?
Mediation is not about right and wrong and the mediator does not make decisions or issue rulings. Mediation is not therapy. While it may be therapeutic to have a family discussion, the mediator focuses on decisions for the future and not reconciling the past.
Traditional Lawsuit Mediation
A mediator uses a wide variety of tools to facilitate negotiations. Mediation of court cases usually focuses on settlement of the litigation. The mediator frames the discussion around the legal issues and helps parties assess the likely outcomes at trial and risks of not reaching terms of resolution. Traditionally, civil court mediations include the parties’ attorneys if they have them, and the litigants are in separate rooms while the mediator goes back and forth between the rooms. Cabin Succession Planning mediation may or may not include attorneys and oftentimes families meet together for extended discussions in lieu of, or in addition to, meeting in separate rooms.
Cabin Succession Planning Mediation
As discussed above, a family’s concerns are varied and broad in cabin succession planning. Family relationships are generally deeper, and the relational ties more enduring than those of lawsuit litigants. Therefore cabin succession planning mediation is varied, depending on each family’s situation. Mediators may solicit input from all participants through confidential private discussions before convening the whole family in mediation. Mediators integrate information from private discussions to define the process and frame the agenda:
- How/will spouses of family members whose relatives first owned the cabin participate?
- Are family members within the same branch of the family in agreement with each other?
- Will multiple generations be present?
- Are there issues between some members of the family getting in the way that may need to be addressed before mediation?
- How has joint ownership been working or not working?
- Perceived barriers to addressing problems?
- Is there any additional information sharing or data gathering needed in order to make decisions?
- Do the family members want to address how/whether they will share information to those not present in the mediation? (The mediator is ethically bound to maintain confidentiality.)
Benefits of Cabin Succession Planning Mediation
Mediation can help families find creative solutions that address all family members’ concerns and prevent hurtful conflict in the future. Families “own” the solution, having constructed it together to meet their unique situation, which makes it more likely to be followed. They also have the opportunity to clarify past misunderstandings and understand family dynamics, which may foster improved relationships. In addition to making decisions on the legal structure, families may consider:
- What communication protocols will help change dynamics that get in the way of discussions?
- How to address future conflicts?
- What are the families’ goals for the use of the cabin and property into the future?
Preparing for Cabin Succession Mediation
Attorneys may or may not attend the mediation session. Either way, the family participants will want to talk with their attorney(s) before mediation in order to understand their legal rights and options. This gives them information they need to make decisions. Sometimes, one attorney for the family participates as a resource person during the mediation session.
In addition to legal rights, the participants should explore their own personal interests and goals, and think about how to articulate them with the intention of moving the family closer to decisions. Family members should be prepared for the discussion to be difficult at times; there is often stress or emotional impact when discussing cabin succession planning decisions. It is a good idea to have a negotiation plan and yet remain flexible:
- What questions remain?
- How will information be shared and when?
- What is the highest hope for the mediation outcome?
- What can realistically be done?
- What is not acceptable?
- What is most important to the others involved and how to address those needs?
- What “bottom line” terms absolutely must be achieved?
Whether families resolve issues on their own, with their lawyer or the assistance of a mediator, taking time to fully discuss and address the roadblocks is important. Ultimately it may prevent years of family strife, increasing the likelihood that the family cabin remains a place of shared history, where family members can relax, enjoy each other and create new memories.