In the northern part of the Monrepo estate, on a small island that is a granite rock called Ludwigstein, there is a complex of structures and monuments, including the snow-white Ludwigsburg chapel, the family necropolis of the Nikolai family, the Medusa grotto, gates, a pier, and several granite staircases leading up the rock. The secluded neo-Gothic chapel, resembling a miniature castle, was built in the 1820s based on a design by the English architect Charles Heathcote Tatham.

During the time when the Monrepo estate was owned by L. G. Nikolai, this island was commonly called the Hermitage or the Hermit's Rock, and later Erichstein (in memory of the tragic fate of the Swedish King Eric XIV, whose spirit, as poetically imagined by Nikolai, wanders the island every midnight).

The constructions on the Hermit's Rock appeared gradually. Among the first on the island were a small bridge, later replaced by a causeway, a stone staircase to the summit, and the Medusa grotto. The decorative chapel with four turrets appeared on the island a little later, during the time of Paul Nikolai. In 1820, both his parents died: Ludwig Heinrich Nikolai and Johanna Margaretta Poggenpohl. They were buried in the village of Sorvali, but soon their remains were transferred to a stone crypt on Erichstein island, and since then the island has been called Ludwigstein ("Ludwig's Stone") in memory of Ludwig Nikolai.

Between 1822 and 1830, the island's development continued. The remains of Ludwig and Johanna Nikolai were relocated there, and an urn was installed in memory of Ludwig Nikolai’s close friend—the librarian and fabulist Lafermiere (the urn has not survived).
Later, brick crypts were built in the northern part of the island, housing the remains of four generations of the Nikolai barons. The island could only be reached by ferry. The gates and railings of the pier, as well as the ferry itself, were made in a unified style featuring pointed arch motifs.

The estate owners and the island’s caretakers planted many trees there, united by a single idea. The Ludwigstein dendropark, like the Monrepo park, was created according to a specific plan and was roughly divided in two by a vertically ascending staircase. Along the water grew somber spruces, black alder, and rare birch trees that softened the gloomy composition of the plantings. A stone staircase led upward to the summit of the island of the Dead.

In the post-war period, the burials were subjected to acts of vandalism, and the family cemetery was destroyed. The crypts of the Nikolai family members on Ludwigstein island were emptied and desecrated. The ashes were scattered, and almost no tombstones remained. In recent years, some repair work has been carried out on Ludwigstein island, but so far only the tombstone over the grave of Paul Ernst Georg Nikolai (1860–1919) has been restored, and the chapel partially renovated.

For outsiders, the family necropolis was inaccessible. During Soviet times, the ferry crossing was replaced by a wooden bridge, which was dismantled at the end of the 20th century.

During restoration work from 2002 to 2007, the tombstone of Paul Ernst Georg von Nikolai, the last male in the family line, was restored.