Friday, September 13, 2013
Most families that have a cottage would like to keep that cottage in the family. However, many issues arise when trying to secure an asset like a cottage for future generations. One of the issues is having a succession plan for the family cottage. Figuring out who will take on the responsibility and upkeep of the property is crucial in assuring the cottage will be passed on. Some important factors to consider in making the determination of the heir responsible for the cottage are the cost of owning the property, how far the heir lives from the cottage, their significant other, and the amount of time they have to dedicate to the upkeep.
Another issue in cottage succession planning deals with tax. A cottage typically has significant capital gains tax obligations. One potential solution to address the capital gains tax issue is to transfer the cottage into a trust or corporation. However, there is no way to avoid capital gains tax so it deserves some thought. Additionally, determining if there is going to be a direct owner or shared ownership can help the cottage succession plan. Once the decisions about the cottage succession plan have been made it is critical for them to be expressed in the will.
See Matthew J. Wilson, Cottage Properties & Estate Planning, Lerners Real Estate, Feb. 26, 2013.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.