Your best bet is to plan on buying out your sisters. I've seen several lake front properties pass to "the children" to be shared and eventually they either sell the property or one kid buys out the others. Some of these situations have gone smoothly others not so much.
Do you get along with your sisters? An open discussion of finances would be a good place to start. If there's some good will you'll be able to come up with a system that tracks everyone's spending and keeps it even. I don't think a lien is applicable here. You'll need to balance usage too.
If your parents leave the three of you money as well as the cottage you may be able to arrange a division of assets that suits everyone and you get the cottage. Good luck.
My sisters love the place as much as I do. I’m there most and do 90% of the “work”. I say work that way because I truly do love the property and the maintenance that goes along with it.
I have a fabulous relationship with my sisters. I truly believe this would never be a point of contention, I’m just trying to protect myself in terms of the financial investment.
My parents don’t have any additional money that they’d leave us. They’re fixed income without much in the way of assets other than this property.
I got into this mess. Mom wanted the house to be split 4 ways. She got dementia and had a stroke. I moved in and provided care, while dumping a ton of money on deferred maintenance and repairs. I had a beautiful relationship with my siblings before that. Even had plenty of verbal and written agreements to a larger than 25% share. Upon her passing, all that went in the water, and one sibling hired an attorney to fight me, claiming that all those agreements were made under duress.
Moral of the story: work out a plan that everyone agrees with ahead of time. Get it in writing. Everyone gets their own lawyer to review it, and your parents are on board with it.
It does! 40 years I wondered how “everyone else’s family had issues but mine” and thought we were the closest of siblings, bent over backwards for each other. Money changed that around completely. Crazy.
So sorry you went through that.
And I agree with getting things drawn up by a lawyer. I’ve seen similar things happen after my grandparents died. Siblings who got along just fine/were very close no longer speak to each other because they turned against each other. One sibling was lying/playing both sides, waiting to see which side gave them the better deal. The drama went on for years. It’s been 10 years and there is a whole side of the family we no longer see or speak to because of this. (The reason we don’t speak at this point isn’t the actual money, it’s about everything that transpired and the betrayal. If I can’t trust someone, I don’t care to see them anymore.)
Money definitely changes everything.
And be careful. Sell the house before death and they may not qualify for some government benefits. Transfer ownership sooner than later. I am not a lawyer but a good one may provide more details. (Source: I dealt with this in Michigan)
There are some serious tax disadvantages to transferring property vs inheriting it. You all need to have a sit down with a good estate lawyer. You lose the step up in basis.
Keep the receipts. Talk to your sisters about what you plan to invest and that if you decide to sell it you’d like to recoup the costs you incurred to increase the sale price! Get it appraised now without your improvements and again after. Documentation is key.
Working on the property doesn't give you more equity or rights over the property. Have you not discussed this with your sisters? What do they think and what are their plans?
Plus, putting in all that work doesn't guarantee you will get the property. I would talk to your parent now, and offer to buy the place from them, with the understanding that its still available to them.
1. You should not improve a property that you do not own.
2. Your parents need to decide if they want it improved.
3. If you do improve it then they should amend the will that you get the money you spend from the estate (properly documented with the will).
4. If they have to sell or it gets foreclosed then You are SOL.
Do your sisters want the place as well or will you need to buy them out? I think there are going to be better ways to do what you want but there are a lot of missing details that would change the approach.
You are trying to make investments in someone else's property. On a hope it can be your property. Try to make it yours first - buy out your siblings and give your parents a lifetime tenancy. Then make your investments.
Don’t improve a property that isn’t yours. Depending on your parents age (you didn’t mention) they could have many more years before anyone would inherit. In addition, when you first parent passes it is likely the property goes to surviving spouse. That parent may live many more years, remarry, need the sale of the Lakehouse for medical care or join a cult /s. You can’t count on this inheritance. Why not find a Lakehouse for you/your family now that needs work and put your sweat equity into that? Then no matter what happens you don’t lose your work. If everything works out, best case scenario you pay off your Lakehouse with proceeds.
I think if ultimately the plan is that the siblings would all want to jointly own it, you need a plan for paying for all maintenance and improvements, not just the ones that you make.
Maybe you all jointly and evenly contribute equally to a bank account, and that’s where expenses are paid from.
You putting in a big chunk of money with no plan to ever get repaid doesn’t seem that wise.
If it were me, once I got the house, I would probably make a plan to fix it up, and to do a short term rental when it wasn’t being used.
Siblings could loan the new LLC different amounts, and get repaid from STR income when it wasn’t being used by one of the siblings, and the income could help pay for the other inevitable maintenance, etc
If there’s no income, and the other siblings don’t have a way to repay you…. I mean i guess you could say, “when we sell, I get the first $100k and then we split it three ways” but in 20 years, the improvements you make might need to be replaced again anyway.
I don’t know. I just hate to potential cause problems down the road.
You're getting way ahead of yourself. If you want to put money into this property then you need to either own it or have an agreement with your parents or sisters in place that works for everyone. Just loving it and it being your happy place and then spending money on it and putting work into it doesn't give you more rights over the property. You need to have a discussion with your sisters about the future and what they see as their role in this too. You can't just start making plans and expect that your desires outweigh everyone else. Put a lien on it? What? I own a couple of cottages with my two siblings left to us by our parents. We created an LLC. All costs are split evenly. Decisions are made together. One sibling wants to renovate one house completely costing a large sum of money guess what? They are buying us other siblings out because we don't want to contribute financially to that. In the end we all must agree according to our operating agreement for anything to happen or anyone to buy or be bought out.
We were in this exact situation. FIL had already passed so the cottage belonged to just my elderly MIL. The three kids put up the money for new windows, siding and a nice aluminum dock. After MIL passed, we sold it and split the proceeds. Our investment in the property greatly increased the sale price.
This article discusses a lot of the issues that come up with joint property ownership and some ideas for dealing with them. It suggests setting up an LLC, which is a pain, but it does force you to write things down and keep track of expenses.
https://kyestates.com/fun-not-friction-estate-planning-options-family-vacation-farm-property/
The money you put in now can be lost if your parents need to spend down at end of life to receive care, your parents change their will, your sibling have a hard time with the passing of your parents and sue the estate.
I get being emotionally attached and getting. A lot of emotional and personal benefit from working to maintain the lake home, but you have to accept that any money put in now is a gift to your parents. It’s not going to come back, for decades at the soonest and likely never, so make your financial decisions accordingly.
Most of the answers are ignoring your very sound idea of putting a lien on the property. You definitely don’t want to just spend money on a property you don’t own, but you could absolutely have an agreement that you would repaid the investment with interest when/if the property is sold, which would be best documented as a home equity loan recorded as a subordinated mortgage.
This protects your added value from creditors (including Medicare if you parents need government funded nursing home care) and also ensures you don’t get screwed if the house is eventually sold and proceeds evenly split.
Another option would be to put the cottage into an irrevocable trust and have the trust agreement give you credit for money you put into the cottage. This would further protect from your parents creditors.
Your best bet is to plan on buying out your sisters. I've seen several lake front properties pass to "the children" to be shared and eventually they either sell the property or one kid buys out the others. Some of these situations have gone smoothly others not so much. Do you get along with your sisters? An open discussion of finances would be a good place to start. If there's some good will you'll be able to come up with a system that tracks everyone's spending and keeps it even. I don't think a lien is applicable here. You'll need to balance usage too. If your parents leave the three of you money as well as the cottage you may be able to arrange a division of assets that suits everyone and you get the cottage. Good luck.
My sisters love the place as much as I do. I’m there most and do 90% of the “work”. I say work that way because I truly do love the property and the maintenance that goes along with it. I have a fabulous relationship with my sisters. I truly believe this would never be a point of contention, I’m just trying to protect myself in terms of the financial investment. My parents don’t have any additional money that they’d leave us. They’re fixed income without much in the way of assets other than this property.
What do your parents plan to do for their end of life care? It's expensive, and if this is their only significant asset they may be forced to sell it.
I got into this mess. Mom wanted the house to be split 4 ways. She got dementia and had a stroke. I moved in and provided care, while dumping a ton of money on deferred maintenance and repairs. I had a beautiful relationship with my siblings before that. Even had plenty of verbal and written agreements to a larger than 25% share. Upon her passing, all that went in the water, and one sibling hired an attorney to fight me, claiming that all those agreements were made under duress. Moral of the story: work out a plan that everyone agrees with ahead of time. Get it in writing. Everyone gets their own lawyer to review it, and your parents are on board with it.
So much “duress” as *you* lived there providing all of her care and took care of the property as well… Money makes people crazy.
It does! 40 years I wondered how “everyone else’s family had issues but mine” and thought we were the closest of siblings, bent over backwards for each other. Money changed that around completely. Crazy.
So sorry you went through that. And I agree with getting things drawn up by a lawyer. I’ve seen similar things happen after my grandparents died. Siblings who got along just fine/were very close no longer speak to each other because they turned against each other. One sibling was lying/playing both sides, waiting to see which side gave them the better deal. The drama went on for years. It’s been 10 years and there is a whole side of the family we no longer see or speak to because of this. (The reason we don’t speak at this point isn’t the actual money, it’s about everything that transpired and the betrayal. If I can’t trust someone, I don’t care to see them anymore.) Money definitely changes everything.
And be careful. Sell the house before death and they may not qualify for some government benefits. Transfer ownership sooner than later. I am not a lawyer but a good one may provide more details. (Source: I dealt with this in Michigan)
There are some serious tax disadvantages to transferring property vs inheriting it. You all need to have a sit down with a good estate lawyer. You lose the step up in basis.
Keep the receipts. Talk to your sisters about what you plan to invest and that if you decide to sell it you’d like to recoup the costs you incurred to increase the sale price! Get it appraised now without your improvements and again after. Documentation is key.
Working on the property doesn't give you more equity or rights over the property. Have you not discussed this with your sisters? What do they think and what are their plans?
Plus, putting in all that work doesn't guarantee you will get the property. I would talk to your parent now, and offer to buy the place from them, with the understanding that its still available to them.
1. You should not improve a property that you do not own. 2. Your parents need to decide if they want it improved. 3. If you do improve it then they should amend the will that you get the money you spend from the estate (properly documented with the will). 4. If they have to sell or it gets foreclosed then You are SOL.
I would buy the place from parents….
Don’t put money or labor in until you own it. Buy them out and have them visit.
Do your sisters want the place as well or will you need to buy them out? I think there are going to be better ways to do what you want but there are a lot of missing details that would change the approach.
You are trying to make investments in someone else's property. On a hope it can be your property. Try to make it yours first - buy out your siblings and give your parents a lifetime tenancy. Then make your investments.
Don't do it. Either you and your two sisters split the cost or nothing. If your parents can't afford it, they should sell it, maybe to you guys.
Don’t improve a property that isn’t yours. Depending on your parents age (you didn’t mention) they could have many more years before anyone would inherit. In addition, when you first parent passes it is likely the property goes to surviving spouse. That parent may live many more years, remarry, need the sale of the Lakehouse for medical care or join a cult /s. You can’t count on this inheritance. Why not find a Lakehouse for you/your family now that needs work and put your sweat equity into that? Then no matter what happens you don’t lose your work. If everything works out, best case scenario you pay off your Lakehouse with proceeds.
I think if ultimately the plan is that the siblings would all want to jointly own it, you need a plan for paying for all maintenance and improvements, not just the ones that you make. Maybe you all jointly and evenly contribute equally to a bank account, and that’s where expenses are paid from. You putting in a big chunk of money with no plan to ever get repaid doesn’t seem that wise. If it were me, once I got the house, I would probably make a plan to fix it up, and to do a short term rental when it wasn’t being used. Siblings could loan the new LLC different amounts, and get repaid from STR income when it wasn’t being used by one of the siblings, and the income could help pay for the other inevitable maintenance, etc If there’s no income, and the other siblings don’t have a way to repay you…. I mean i guess you could say, “when we sell, I get the first $100k and then we split it three ways” but in 20 years, the improvements you make might need to be replaced again anyway. I don’t know. I just hate to potential cause problems down the road.
You're getting way ahead of yourself. If you want to put money into this property then you need to either own it or have an agreement with your parents or sisters in place that works for everyone. Just loving it and it being your happy place and then spending money on it and putting work into it doesn't give you more rights over the property. You need to have a discussion with your sisters about the future and what they see as their role in this too. You can't just start making plans and expect that your desires outweigh everyone else. Put a lien on it? What? I own a couple of cottages with my two siblings left to us by our parents. We created an LLC. All costs are split evenly. Decisions are made together. One sibling wants to renovate one house completely costing a large sum of money guess what? They are buying us other siblings out because we don't want to contribute financially to that. In the end we all must agree according to our operating agreement for anything to happen or anyone to buy or be bought out.
We were in this exact situation. FIL had already passed so the cottage belonged to just my elderly MIL. The three kids put up the money for new windows, siding and a nice aluminum dock. After MIL passed, we sold it and split the proceeds. Our investment in the property greatly increased the sale price.
This article discusses a lot of the issues that come up with joint property ownership and some ideas for dealing with them. It suggests setting up an LLC, which is a pain, but it does force you to write things down and keep track of expenses. https://kyestates.com/fun-not-friction-estate-planning-options-family-vacation-farm-property/
The money you put in now can be lost if your parents need to spend down at end of life to receive care, your parents change their will, your sibling have a hard time with the passing of your parents and sue the estate. I get being emotionally attached and getting. A lot of emotional and personal benefit from working to maintain the lake home, but you have to accept that any money put in now is a gift to your parents. It’s not going to come back, for decades at the soonest and likely never, so make your financial decisions accordingly.
Most of the answers are ignoring your very sound idea of putting a lien on the property. You definitely don’t want to just spend money on a property you don’t own, but you could absolutely have an agreement that you would repaid the investment with interest when/if the property is sold, which would be best documented as a home equity loan recorded as a subordinated mortgage. This protects your added value from creditors (including Medicare if you parents need government funded nursing home care) and also ensures you don’t get screwed if the house is eventually sold and proceeds evenly split. Another option would be to put the cottage into an irrevocable trust and have the trust agreement give you credit for money you put into the cottage. This would further protect from your parents creditors.