Special to the The Globe and Mail – By Paul Brent
Besides fighting through traffic snarls to get there, the family cottage by the lake has typically been viewed as a place of tranquility with a lifetime of fond memories.
For older vacation-property owners looking to hand ownership down to the next generation, however, the process can cause plenty of financial headaches and family drama without the proper planning.
On the financial side, capital gains costs could be steep when passing on generations-old cottages – even before the recent run-up in property values. Add family dynamics to the mix, and what should be a simple exercise gets complicated quickly...
For Ngoc Day, a fee-only certified financial planner with Macdonald Shymko & Co. of Vancouver, the two main issues for the next generation stem from ongoing financial costs for items such as upkeep, utilities and taxes and equitable access to the property.
“I will position it as a fractional share” when multiple siblings are taking over ownership of the property, she says. “You respect the other owners, and they have benefits, rights and obligations and they respect yours.”
Typically, she holds a meeting with the offspring to gauge their interest in owning the family cottage. In some cases, some children don’t want a stake, either because they don’t have kids, have moved away or can’t afford it.
In those cases, the other children “will buy it off the estate and have that subtracted off their inheritance,” she says.