After our recent blog about estate matters in Ancient Rome, I was reminded that to the Ancient Greeks, the “dog days” happened when the star ‘Sirius‘ appeared to rise just before the sun in late July and August. The Greeks referred to these days, the hottest days of the year, and a period that could bring fever or even catastrophe, as The Dog Days of Summer.

Cottages, if not carefully considered in estate planning, can often bring fever and catastrophe, to families when their transfer is not properly planned in estate plans. Be it an unexpected tax liability, or unhappiness amongst siblings, cottages can cause great pains. 

Today, we look at two scenarios of cottage transfer, specifically the living gift (inter vivos) and the testamentary gift (after death).

Emotion and attachment to the family cottage can run deep and go well beyond the financial value of the property. As we discussed here in 2013, proper planning is essential to avoid the kind of strife that was examined in our blog post, “Perils in the Succession of the Family Cottage.”

One way to clearly establish your wishes and see them carried out is to gift the cottage while still alive. A “gift inter vivos” is Latin for a gift among the living and is a common way of transferring ownership, particularly if you no longer use or visit the cottage. A tax advisor is an important and necessary resource when considering such a gift, as the gift of a cottage can give rise to a tax burden on the giftor.

It’s important to remember that once the cottage gift is complete, it is, technically, no longer yours and the receiver of the gift, be it a child or sibling, would be free to do as they wished…. even sell it. So it’s not necessarily the right vehicle for transfer, as it were, for every family.

Another very common means of transfer is by Will.

You are free to name your heirs to the cottage as you so choose, but often when there is more than one child inheriting, for example, a trust becomes a very good way to address possible conflicts that might otherwise arise. It also insulates the property from potential legal disputes like bankruptcy or divorce.

A trust also becomes a good way to establish responsibility for the cottage and its expenses. The Will can stipulate that funds are set aside for maintenance or yearly upkeep and those funds can ease the burden on a beneficiary who may not be in the best financial position to inherit such a gift.

As the Dog Days of Summer roll on and another cottage season soon comes to a close, proper planning for that beloved family cottage can prevent the fever and catastrophe that the Greeks were so alive to each time that Dog Star came bounding across the sky.

Thanks for reading and enjoy the sun!

Suzana Popovic-Montag & Daniel Enright