Closing Up the Cottage? Don’t Forget to Check the Deed

For many Michigan families, the end of summer means one last weekend at the cottage followed by the familiar fall checklist: pulling in the dock, shutting off the water, putting away the outdoor furniture and getting everything ready for winter.

While you are protecting the cottage from another Michigan winter, it is also a good time to make sure the cottage is protected by your estate plan.

One of the most important parts of a trust-based estate plan is making sure that the assets that are supposed to be governed by the trust are actually connected to it. For real estate, that generally means looking at the deed.

Simply having a trust does not automatically place every piece of real estate you own into that trust. Michigan law recognizes the transfer of property to a trustee as one way of placing property into a trust. In practical terms, if your estate plan calls for the cottage to be owned by your trust, there should ordinarily be a deed reflecting that ownership.

How Does a Cottage Get Left Out?

It happens more easily than many people realize.

Perhaps you purchased the cottage after your estate plan was completed. Maybe the cottage was inherited from a parent and the deed was never coordinated with your own trust. Or perhaps you refinanced the property and never checked afterward to confirm how title was ultimately recorded.

Any of those events should prompt a review.

A trust can contain detailed instructions about who should receive the family cottage, whether children may continue to use it, or how it should ultimately be sold. But those provisions work best when the ownership of the property has been properly coordinated with the estate plan.

There Is More Than One Way to Plan for the Cottage

Depending upon the circumstances, the appropriate deed may transfer ownership directly to the trustee of your living trust.

In other situations, an enhanced life estate deed, commonly called a “Lady Bird deed,” may be appropriate. A properly drafted Lady Bird deed can allow the owner to retain control of the property during life while providing for the property to pass at death to the designated beneficiary, which can include a trust. This type of deed is frequently used in Michigan estate planning and can allow real estate to transfer without probate.

Neither approach is automatically right for every family. The proper deed depends on how the cottage is owned, the terms of the estate plan, family circumstances, tax considerations and what the owners want to happen to the property in the future.

Add the Deed to Your Annual Cottage Checklist

Estate plans should be reviewed periodically, and real estate ownership should be part of that review.

You do not necessarily need to change anything each year. But when you are closing the cottage for the season, take a moment to ask:

Is the cottage still titled the way my estate plan says it should be?

If you are unsure, we can review the deed and your estate plan to make sure they are working together.

You already take steps every fall to protect the cottage from frozen pipes, snow and winter weather. Taking a few minutes to review the title can help protect it for the next generation as well.