The Family Cottage – The Joys and Challenges of Ownership

The beloved family cottage is a magical place for many Canadian families where great moments are treasured. Memories of jumping off the dock, paddling a canoe, listening to the loons, roasting marshmallows over the bonfire and fishing with grandpas are all treasured moments.

Real estate values of waterfront properties have increased significantly since the mid 1990’s and many cottage owners have not realized the income tax implications of this increase in value at the death of the cottage owner(s). Succession planning of a cottage which is not your principal residence is a critical component of any estate plan and the intentions for the cottage need to be aligned with your will and investments. Seek expert advice from a lawyer and your financial advisor when pursuing this process. The family cottage is an emotional issue for many families as it is part of their soul and holds many fond memories. The cottage is often the central point for families’ gatherings and is much more than just another asset in the estate.

Many clients leave the family cottage in their will to be divided equally without consideration to the following questions.

  1. Do all children and their spouses want to use the cottage?

  2. Can all the children equally afford the maintenance and upkeep of the cottage?

  3. Do all children live within a reasonable distance to access the cottage?

  4. Do you want to treat all children fairly and equally?

In our experience it is far better to have this discussion with your children and professional /financial advisors while you are alive rather than after the fact when the children or remaining spouse is dealing with the will. In today’s world of multiple marriages and often children from different families it is crucial to think out the future of the cottage in advance of any untimely death.

A financial advisor can assist you in reviewing your assets, calculating the potential income tax liability at death and probate fees and act as a catalyst for family discussion regarding the future of your family cottage. There are legal options to allow disposition of the cottage during your lifetime while also maintaining control and access to the cottage.

With family and open discussion and advice, legal and financial advisors can help parent’s adult children and the entire family unit find a solution that meets the needs of all and preserves the fond memories that have been made at the family cottage.