Passing the cottage onto the kids?
Consider four things
For many, the family cottage is passed down through
several generations. However, difficulties may arise when the
actual ownership of the property passes from one generation to the
next. The transfer may be subject to capital gains tax if the
property passes to a child or grandchild.
“Transferring ownership of cottages or
other recreational properties is a particular challenge today, as
the value of recreational properties has been rising,”
says Patricia Lovett-Reid, Senior Vice President, TD Waterhouse.
“Your heirs could be forced to sell the property just to
pay the taxes. If you will be in a position to transfer property to
the next generation, it’s important to start planning
today.”
Lovett-Reid recommends people consider the
following:
Open the discussion -- Speak to
your children about whether they want to keep the property and
share in its upkeep. This is a very important step, as the
lifestyles and financial resources of your children may differ.
Expanded estate planning -- If one
child is not interested in the property, you may want to think
about equalizing that child’s share of your overall
estate with other assets.
Hold the property in trust -- One
way to possibly save on tax and retain control of the property is
to create a testamentary trust in your Will, to hold the property
in trust for your children. Be sure to advise your children of your
decision.
Choose your trustee carefully --
Given the complex nature of a trust, think carefully about the
selection of an experienced trustee to administer the trust.
“It really pays to talk to your financial
advisor about these issues,” concludes Lovett-Reid.
“They can ensure that you get the professional help you
need to avoid common pitfalls and keep the recreational property in
the family.”
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