The last option I will discuss is retaining complete ownership of the cottage while you are alive and directing that it be transferred to some or all of your children upon your death. This is usually done through your Will.
Unless the cottage is the only residence that you own at your death, capital gains tax is likely payable upon your death. Will there will be enough money in your estate to pay the taxes owing or will your children be forced to sell the cottage in order to raise the needed funds?
- Would your children be able to amicably share the cottage?
- Do your children live close enough to use the cottage or are they willing to travel there annually to enjoy it?
- Are all your children interested in shared cottage ownership or would one prefer to own it alone and pay the others for their share?
We recommend that you get your children’s thoughts on the matter. When the family gathers for Thanksgiving, take the opportunity to hear what everyone has to say.
If your children do not have similar financial means, perhaps your Will should include a trust fund which could be used to pay such costs as property taxes, insurance, major repairs, etc.
If you leave the cottage to one of your children, you can even things out in other ways so that your children are treated equally. As capital gains tax will be paid from the estate, consider having a life insurance policy in place to be used to pay the capital gains tax.
Instead of an outright gift, another option is to divide your estate among your children equally but in your Will give one or more of your children the option to purchase the cottage from your estate.
There are many things to consider when transferring your cottage after death. Consult with an estate planning specialist who can review all of the options with you and help you make the best choice for you and your family.
Reproduction of this blog is permitted if the author is credited. If you have questions or if you would like more information, please call us at 613 836-9915. This blog is not intended to be legal advice but contains general information. Please consult a lawyer or other professional to determine how the information in this blog might apply to you.
Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.