The Canadian Press - ONLINE EDITION

Say goodbye to family cottage before its too late: financial advisors weigh in

  • Print

TORONTO - After the unforgettable family gatherings, sunbathing on the dock and picture-perfect moments with the kids, it's hard to say goodbye to the cottage you've grown to love.

But financial advisors say that learning when to let go is a fundamental part of ensuring that your lakefront property doesn't become a bad investment.

"There's the romance of it, and there's the reality," said Jason Pereira, a senior financial consultant at Investment Planning Counsel in Toronto.

"The cottage is a place where you escape, but there's also its own series of responsibilities."

For cottage dwellers, that day is inevitable. Eventually you will face the dilemma of either selling the property or passing it down to your children, if you have them.

Neither option is easy and, in many cases, comes down to choosing the best time for the transition which, for tax purposes, will likely be after retirement when your annual income drops.

Financial advisors say one of the biggest mistakes cottage owners make is assuming that somebody else in the family actually loves the place as much as they do.

"A lot of people are quite preoccupied with keeping the property in the family, for some reason," said Christine Van Cauwenberghe, assistant vice president of tax and estate planning at Investors Group.

"People need to look at selling the cottage as a very viable solution."

Several advisors said they've seen instances where transitioning the ownership of the property created powerful rifts within the family. They suggest that cottage owners take a step back and ask themselves whether a few days at the beach should come at the expense of potentially destroying family relationships or shifting a financial burden onto their children's shoulders.

"Often you'll have two kids, and one will be financially successful and one will be not as financially successful," said Greg Rasmussen, an investment advisor at Manulife Financial in Muskoka, Ont., a popular cottage region.

"As soon as you transfer it into their name you're going to have that tax bill."

If one child can't afford the cottage, but the family insists on keeping it, then make special arrangements that are in writing. A promissory note can clearly outline the long-term financial expectations.

"Make sure that child is paying fair market value," Cauwenberghe said.

"Maybe it's not in cash, but in receiving that much less of the estate."

Even in a smooth transition of ownership, there's still years of potential fights ahead as siblings get saddled with the expenses of regular upkeep, taxes, and figuring out a way to share the property without bickering over whose family gets the place each weekend.

That's why advisors suggest that, unlike jewelry or silverware, a cottage shouldn't be treated like a family heirloom because it's not the kind of asset you can store in a drawer and forget about.

"A lot of people can't afford — even on a divided basis — to run them," said Tony Layton, chief executive of financial services company PWL Capital.

He said he's seen instances where children will gain possession of a cottage, but don't have time to maintain the property and let it fall into "semi-ruin."

Eventually those children can be forced to sell the cottage and — depending on how much the value has appreciated over the years — can be hit with a massive tax bill they can't afford.

In other instances, one child might want to sell the property while other others do not, which can lead to further problems if those situations aren't laid out in writing.

"If anything, you should have agreements in place that say: 'You can buy me out or I can force the sale,'" said Pereira.

"There almost has to be a prenup in place for the cottage to avoid those hazards down the road."

Cash proceeds are easier to divide amongst a group because its a relatively clear-cut process that involves more numbers and less emotion.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Key of Bart - Take It Easy

View more like this

Photo Store Gallery

  • A goose comes in for a landing Thursday morning through heavy fog on near Hyw 59 just north of Winnipeg - Day 17 Of Joe Bryksa’s 30 day goose challenge - May 24, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)
  • JJOE.BRYKSA@FREEPRESS.MB.CA Local-Postcard  Day-Horror frost and fog created a most beautiful setting at Assiniboine Park Thursday morning in WInnipeg- Enviroent Canada says the fog will lifet this morning and will see a high of -7C-  JOE BRYKSA/WINNIPEG FREE PRESS- Feb 18, 2010

View More Gallery Photos

Poll

What should the city do with the 102-year-old Arlington Street bridge?

View Results

View Related Story

Ads by Google