June 2015

Keeping it in the family

Do you have a cottage that you want to transfer to future generations? Cherished memories you and your children have of building and rebuilding the dock, sleepovers with cousins and family dinners are all reasons to want to “keep it in the family. With that said, additional complexities may arise when a cottage is to be shared among multiple family members.” Also, cottage prices have increased significantly and owners may be faced with capital gains taxes. 

Transferring ownership of a cottage can have unique estate planning issues.

      Family issues
Along with the emotional attachment, there are many other issues that you should discuss with your family regarding the cottage, some of those include:
  • Determining which, if any, of the children or other family members would be interested in future ownership/joint ownership? 
  • Will they be able to afford maintaining the cottage? 
  • How will you equalize your estate for those who do not wish to be part owners.

Tax issues
Many cottage owners have experienced a significant increase in cottage prices over the last number of years and are concerned about the potential tax liability as they face large capital gains. Some of the taxation issues that you may face with regards to your family cottage are.

  • Capital gains taxes and probate fees where applicable  
  • Deemed disposition on death 
  • Determining the adjusted cost base, and 
  • Does the cottage qualify as your principal residence.

Strategies for effective transfers to reduce the tax you pay:

  • Transfer cottage to the surviving spouse
  • Consider making the cottage your principle residence, if it has appreciated more than your home 
  • Implement a life insurance solution to help fund the tax liability upon transfer and/or to equalize the estate for those siblings who are not interested in owning the cottage
  • Consider owning the property jointly with your children to reduce or avoid probate taxes where applicable
  • Utilize a trust which can help in situations where children may not be able to handle financial responsibilities of the cottage or where creditor protection may be an issue

Addressing these issues today, especially for those who are facing large capital gains, can help ensure tax-efficient handling of your estate while keeping harmony in the family.

Act today, to save for tomorrow 

Identifying those issues that may cause conflict, discussing them with your children and acting on opportunities available to reduce taxes are all key aspects of an effective cottage succession plan and ensuring those summers at the cottage continue to provide memorable moments.


If you would like a copy of our educational report entitled “Cottage Succession - Keeping it in the family”, that discusses these strategies in more detail or if you would like help developing an effective plan, please contact your Investment Advisor.


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