When it comes to deciding on the future of a family cottage for residents of Ontario, the owner will need to address several questions. While the decision on who should inherit the cottage could be challenging, six tips can help the owner with their estate planning as they try to determine who would be a good candidate to take over the cottage.
First, tax considerations will need to be reviewed. An early transfer of cottage ownership before a person's death could help defray tax costs, especially if the property has not seen a significant increase in value. Another option is using the exemption for a principal residence on the cottage. Second, a transfer while the estate owner is alive can help determine how well the beneficiaries manage the cottage. In addition, the owner can offer input and monitor the heir's responsibility level. Third, watching children take pleasure from spending time at a cottage can be very rewarding. The owner can enjoy their golden years making memories with their loved ones instead of worrying about the upkeep of the property.
Fourth, the cottage could serve as a good method of asset protection for someone who is less likely to face a business claim. Fifth, some owners might be depending on the income from a cottage sale to bring in money for retirement. In some cases, children might want to buy the cottage. The owner could then provide financing as the children repay the loan in monthly installments. Sixth, the cottage could be transferred to a trust so the owner does not need to relinquish control.
Weighty decisions about the distribution of a cottage can be admittedly emotional. An estate planning lawyer might review various considerations with a cottage owner to help them make the best decision regarding property transfer.
Source: The Globe and Mail, "Should you transfer the cottage to your kids during your lifetime?", Tim Cestnick, June 05, 2014