Sailing, and Planning, the Two C’s: Cottage + Charitable
By Stephen B. Selden, Wealth Management Advisor
The Family Cabin in Minnesota; the Camp in New England; and everywhere, the Farm, the Hunting Lodge or the Beach House.
In Michigan, it’s the Cottage.
And it’s where you, your children, and your grandchildren most want to be.
But what do you do when the last of the older generation passes away and there are two or three or more of you who inherit this special place? With a value perhaps well into seven digits?
Who is in and who is out? How do you pay the property taxes and cover the overdue improvements? What if one of you dies – who owns it now? How do you keep it in the family, pay the estate taxes, and avoid a forced sale? A classic liquidity and control problem.
There is a solution. With the help of your attorney and financial advisor, you can form a limited liability company, or LLC, and an irrevocable life insurance trust, or ILIT. With the LLC comes a buy-sell agreement, funded with life insurance, to create cash to buy the interest of any owner at death. And the ILIT creates cash at death, via life insurance, to cover estate taxes, property taxes, and improvements. The bottom line? The event that triggers the problem also triggers the cash, tax-free, that provides the solution to the problem.
And here is where the charitable part comes in: The same approval process that resolves the cottage planning challenge can also be used to create Charitable Life Insurance that is owned by, and payable to, The Petoskey-Harbor Springs Community Foundation. These proceeds can be in the hundreds of thousands, or even millions, directed toward your family’s environmental and community concerns – to assure that this beautiful part of the world where we most want to be will only get better in the years to come.
Mr. Selden is a Wealth Management Advisor affiliated with Northwestern Mutual Wealth Management Company, and has represented Northwestern Mutual Life Insurance Company since 1977. He specializes in estate and comprehensive financial planning. Concerned with community development, arts education, and charitable giving, Mr. Selden has served on a wide array of non-profit boards and committees. He resides in Petoskey with his wife Sandy.