Choosing When to Transfer the Family Cottage

Choosing When to Transfer the Family Cottage

October 17, 2024


Transferring the family cottage is more than just a financial and legal decision—it’s a deeply personal one that can impact your family's dynamic for generations.

Chris Hanley, CA, CPA, CFP® and Denika Heaton, BBA, JD, TEP  
Mawer Tax and Estate Planning Specialists 

Transferring the family cottage is more than just a financial and legal decision—it’s a deeply personal one that can impact your family's dynamic for generations. The process involves a careful balance of emotional considerations and practical planning.

In the final two articles of our cottage succession planning series, we’ll guide you through several key financial, legal, and personal considerations to help ensure the transfer process runs smoothly—and that family relationships can remain intact throughout.

Please note the following suggestions are general in nature. This type of planning involves nuanced tax and legal considerations, so it’s best to consult with your legal counsel for personal guidance.

Having the Family Dialogue

In our first article, we highlighted the importance of bringing everyone together to not only to discuss your wishes around the property, but also confirm if your children really want ownership of it—and if they can truly manage and share those responsibilities.

These discussions can be challenging and might require help from estate planning professionals or a formal family meeting. While difficult, it’s a crucial step to take: addressing these matters before planning the transfer can help prevent potential conflicts or litigation. Usually this step will take time; multiple, frank discussions with family members; and sometimes may even lead to the conclusion that selling is the preferred option.

Deciding When is Best to Transfer the Cottage

If you have decided the family cottage will remain in the family, then timing is one of the most important decisions you'll face. Namely, should you transfer the property during your lifetime, or let it be part of your estate plan?

Each option has its own set of advantages and challenges, and the best choice depends on your unique situation.

Transferring During Your Lifetime

Transferring During Your Life Time Advantages and Disadvantages

1 Probate fees are based on the province in which the cottage is situated.2 When evaluating the tax consequences, review whether using the principal residence exemption could eliminate the capital gains tax liability for either a lifetime gift/sale or upon death.

Transferring Upon Your Passing

Transferring Upon Your Passing Advantages and Disadvantages

Each approach has its advantages and disadvantages; the best choice will depend on your specific circumstances, financial situation, and family dynamics. Ultimately, this decision needs to align with your overall estate planning goals.

Our Tax and Estate Planning team is ready to assist you with navigating the intricacies of succession planning for your family cottage. Please contact your Investment Counsellor to explore how we can best support you. 

Disclaimers:

This communication is an overview only and it does not constitute financial, business, legal, tax, investment, or other professional advice or services. It is not intended to be a complete statement of the law or an opinion on any matter. If you (or any of your family members) are a U.S. citizen, hold a U.S. green card, or are otherwise considered a U.S. resident for U.S income/estate tax purposes, the Canadian and/or U.S. tax implications could be substantially different from those outlined herein. No one should act upon the information in this communication as an alternative to legal, financial or tax advice from a qualified professional. No member of Mawer Investment Management Ltd. is liable for any errors or omissions in the content or transmission of this email or accepts any responsibility or liability for loss or damage arising from the receipt or use of this information.

While we endeavour to ensure that the information in this communication is correct, we do not warrant or represent its completeness or accuracy. This communication is not updated, and it may no longer be current. To the maximum extent permitted by applicable law, we exclude all representations, warranties and conditions relating to this communication.

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Mawer Investment Management Ltd. provides this publication for informational purposes only and it is not and should not be construed as professional advice. The information contained in this publication is based on material believed to be reliable at the time of publication and Mawer Investment Management Ltd. cannot guarantee that the information is accurate or complete. Individuals should contact their account representative for professional advice regarding their personal circumstances and/or financial position. This publication does not address tax or trust and estate considerations that may be applicable to an individual’s particular situation. The comments are general in nature and professional advice regarding an individual’s particular tax position should be obtained in respect of any person’s specific circumstances.