Who Should Hold Title to Your Lake Cabin?

Past articles have discussed the advantages of having your cabin in trust so that you avoid probate.  Other articles have talked about why you should hold title in a cabin trust if the cabin is shared by multiple families.  A more recent issue, however, is that many people now rent out the cabin on a weekly basis or just the traditional longer term lease.  In these cases, you should consider holding title in a limited liability company (LLC).

The concern is what if a renter or their guest is injured on your property?  You have insurance to cover those risks but insurance doesn’t always provide coverage.  If you hold title individually or in your revocable trust, the injured party can potentially go after all your assets to recover their damages.  If title is in a LLC, however, an injured party can sue the LLC but they can’t sue or go after your other assets.

A LLC is also a good way to hold title if you have multiple owners since you can discuss in your LLC documents what happens upon a death, divorce or creditor problem of one of the owners.  In addition, LLC’s don’t die so the death of owners does not necessitate a probate.  Many people like to homestead their lake cabin as it’s often more valuable than their “real” home in the metro.  With an LLC, however, you can’t homestead the property.

Another point to consider is many people have multiple business or rental properties and title all of them in their LLC.  The problem with that approach is if something bad happens at one property, those risks spread to all properties within the LLC.  In other words, if someone is injured at the lake cabin, they can recover against all assets of the LLC including other properties titled in that same LLC.  To avoid this risk, you can simply create multiple LLC’s so that you don’t expose all your properties when an accident occurs.

If you do decide to create an LLC, make sure the title is changed to that LLC and then any lease should make clear that the landlord is the LLC, not you individually.

Please send any request for topic suggestions to rene@breenandperson.com.  Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know.  Our purpose is to educate and we hope that you can take something new away from this column each time you read it