As the weather gets warm we see a transition as some come to enjoy their vacation properties in Southern Georgian Bay and others go afar to do the same.  Many families eagerly anticipate quality time at their cottages - cherished retreats often passed down through generations. As you enjoy the summer with family and friends, you may also want to reflect on considerations around cottage ownership.

 

For instance, creating a succession plan for a vacation home can be complex due to the property's sentimental value and potential for differing interests among heirs. Open communication is key.

 

Over time, the property’s value has likely appreciated, leading to potential capital gains and probate taxes once it comes time to pass on the property to your next generation. Considerations like the principal residence exemption or making sure to adjust the cost base by adding eligible renovation expenses may help reduce these taxes.

 

Estate liquidity is another potential issue. A financial plan can help determine what your estate might look like. If the estate lacks funds to cover taxes and other costs arising on death, assets like a second property may need to be sold to cover the expenses. Families may want to explore allowing their children to purchase the property or purchasing  a life insurance policy to provide the necessary funds.

 

Trusts enable shared ownership with trustees overseeing maintenance and costs, but be aware of unique tax considerations such as the “21-year-rule” which may trigger capital gains every 21 years.

 

Preserving a vacation property’s legacy requires tax planning, communication, and tailored arrangements. Proactive planning ensures a smooth transition honoring the property's history.

 

Talk to your tax and legal advisors, and wealth planning team to help ensure you are taking advantage of the relevant options.

 

Fraser Willson, CFP, CIM® | Senior Wealth Advisor | CIBC Wood Gundy | Collingwood | Fraser.Willson@cibc.com | (647) 588-4344

CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc. Fraser is an Investment Advisor with CIBC Wood Gundy in Collingwood. The views of Fraser do not necessarily reflect those of CIBC World Markets Inc. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.