Paradise lost?
If you’re inheriting the family cottage, get expert advice first
By TERRI WILLIAMS
Many Canadians are spending this long Thanksgiving weekend closing up the summer vacation home.
They’re putting boats away for the winter, shutting down water lines and cleaning out fridges and cupboards to keep the mice away through the winter.
Family cottaging is a great Canadian tradition — one that many people inherit from their parents or even grandparents.
If you are in line to inherit a family cottage, you should be talking to your parents now about their intentions and your desires.
Passing down a family cottage or vacation home to children can become very complicated and, if not handled properly, can lead to sibling rifts and family breakdowns.
Cottage owners need to get professional financial, tax and estate advice to ensure their wishes about the cottage are handled cost-effectively and as fair as possible to all the beneficiaries.
If you are hoping to inherit the family cottage, you should be going to the meetings with your parents’ advisers to ensure all these issues are covered:
1. Taxes. If the cottage is a second residence, your parents’ estate will have to pay taxes on any gain in value on the cottage when it passes down to you. With skyrocketing prices of vacation homes across the country, the tax hit could be huge, eating up a good portion of any remaining estate value.
2. Insurance. One way to potentially offset some of that tax hit could be through a life insurance policy covering the taxes when your parents pass away. You may want to get together with your siblings to discuss paying for the insurance policy premiums. It may be a way to share costs and minimize the tax hit when the property is transferred.
3. Transfer of Ownership. Who should the cottage go to? Do all the children use it equally? Will some of the children prefer to receive the proceeds from the sale, while others have a huge emotional attachment to it? An adviser can help set up an estate plan that will be fair to you and your brothers and sisters and ensure your parents’ wishes are fulfilled.
http://torontosun.com/Money/2007/10/03/4545675-sun.html
