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SRA - Keeping the Cottage in the Family
Michael E. Cobb
Michael E. Cobb

Many people are getting ready to open their family cottages at this time of year. The older generation (like me) might struggle with the problem about what to do with the cottage when they are unable to continue with it. Transferring the cottage to the next generation needs a lot of thought and planning. Do the kids want it and can they handle the upkeep costs, including municipal taxes? What about the various tax consequences? I would suggest that the starting point is to decide if you want the cottage kept in the family. If so, a frank discussion is necessary with the children (and ideally, their spouses). Assuming the decision is to keep it in the family, you have to consider the capital gains tax under the Income Tax Act. You can only have one principal residence per family. One half of the gain from the date of purchase of the cottage (you only have to go back to January 1, 1972 if it was owned before then) until the date of transfer or death is taxable. Therefore, if you transfer it or worse, die with it still in your name, even if you leave it to children under your will, a capital gain is triggered and payable by you or your Estate. Incidentally, it is a good idea to have the cottage jointly owned by you and your spouse so the day of reckoning can be extended in the event of the first spouse dying. There are some options like a transfer before death or setting up a trust or a corporation to hold the cottage. You should also take into account the possibility of needing probate and paying probate fees. Also, there are complications for possible claims by spouses of children under the Family Law Act in the event of separation that need to be planned for if necessary. Finally, in the event of a transfer, land transfer tax is applicable but there are ways to minimize the impact. This is definitely an area where you need to get sound advice from your lawyer and accountant. Michael Cobb is a retired lawyer of Cobb & Jones LLP. Should you have any questions for Ask A Lawyer, please direct them to the Simcoe Reformer or ask a lawyer of your choice. For more articles, visit the Library page at