Cottage Succession Planning
The family cottage is where childhood memories are made, and it is often a home that family members feel emotionally tied to. When you consider passing the cottage to the next generation, a recent article on cottage succession planning helpfully cites various transfer options, including establishing a lifetime gift, transfer to joint tenancy, testamentary bequest, and transfer to a trust or corporation.
Each of these options comes with its own financial implications, and working with a financial advisor, lawyer or accountant can help you determine what path you want to go down. The author notes a few things to keep in mind:
· Have an honest discussion. Sit down with the kids and determine if any of them want the cottage.
· Plan ahead for the capital gains tax and other financial hits. If parents are leaving the cottage to the kids, how are they going to pay the tax? One option may be to leave the cottage to the estate, from which funds can be drawn to cover this expense. Another idea is to take out additional life insurance so the tax can be paid from those funds.
· Think about the future. Consider whether your children have the financial means to pay for its upkeep. Everything from house insurance to repairs can add up over the years. You need to be realistic.
· Make it fair. If only one child wants the property, find a way to balance all of the kids’ inheritances with other assets or insurance proceeds. This may avoid a family feud erupting down the road.
Thanks for reading,
Natalia Angelini – Click here for more information on Natalia Angelini.