Many summer visitors to the joys of Northern Michigan and the ambiance of the Lakes in the Antrim, Grand Traverse, Leelanau and Benzie County region arrive to spend a few weeks in the lakefront Family Cottage originally built by one’s grandfather, decades ago. With their eyes on the recent property tax bills it is apparent that the appraised value of the Cottage has skyrocketed. Ordinarily, property tax assessments are “capped” when property is acquired. Then, when it is sold or otherwise passes from one generation to the next, the assessment is “uncapped,” and is usually increased to reflect the current value. For the next generation of family members, they can expect to be faced with taxes, perhaps ten times what are due today, making holding the Cottage that is used only a few weeks in the summer a financial burden, a true luxury.
There is good news, however. Michigan’s Supreme Court has recently approved a planning tool to avoid an “Uncapping” for at least one generation. That tool requires that the current owner – or owners – divest themselves of a portion of their present ownership rights, transferring it to another in the next generation in a “joint tenancy” with the owner, him or herself. Although use of this approach may delay an “Uncapping,” such a tool may not be appropriate for everyone and sound legal and tax advise is recommended before it is used.