Few things are as uniquely Minnesotan as the idea of a lake home or cabin. They're places for families to gather and make memories, to fish and swim and sit around a campfire, or simply to unplug from an otherwise chaotic life. That's exactly what Alan Anderson's father and his friend had in mind in 1953 when they bought a place together on Lake Francis less than an hour west of their homes in Owatonna, Minn.
The two men — A.J. Olson and F.C. Anderson — had grown up together in Cloquet, where they played football and were Eagle Scouts. They went to medical school together, and both were drafted to fight in World War II. Each man returned from the war and settled into a profession as a doctor. Not long thereafter, they became business partners, lived next door to one another, and each raised five children.
For decades, the two men had a simple agreement about how their families would use the cabin. As they aged, they realized it was time to turn over the cabin to their children, and in 2005 they executed a quit claim deed, or legal transfer, essentially giving it to their nine children (one had died as a young adult). They all were aware of instances in which siblings disagreed on what should happen to a cabin after their parents died, or of arguments undermining everything cabins are supposed to be about, said Anderson, who lives in Northfield.
"We decided we needed to come up with an operating agreement, and we needed to try to imagine everything that could possibly go wrong and disputes that could arise," he said.
They created a limited liability company (LLC), of which each is a member. They then drafted a seven-page operating agreement that includes provisions ranging from contributions, how meetings will be conducted, and what will happen upon sale of the property. The nine children sought to address issues before they arose and before there were strong emotions involved.
That was a good move, according to Mark Peterson, an attorney at Moss & Barnett law firm in Minneapolis, who helps clients manage and transition family owned properties.
"The LLC really forces people to sit down and think through what it is they are going to do, and do so at a point before specific issues of contention arise," Peterson said. "You reach an understanding during the calm, rather than trying to address it when the storm is there."
A major point of contention, for example, could be related to making improvements. Or about one person wanting to terminate his or her ownership and cash out the equity. In Anderson's case, the group decided people could quit paying their dues and walk away, but they wouldn't be entitled to anything else because nobody has an equity status in the partnership. They also decided that if the cabin were sold outside the family, all proceeds would go to the Olson-Anderson Owatonna Clinic Foundation. While they maintain the cabin such that it keeps water out and is a pleasant place to spend the summer, they've never replaced the original siding or swapped out the wood paneling on the interior walls.
