In May, I wrote about the tax bill hiding inside most cottages: at death, Canada Revenue Agency (CRA) generally treats the property as sold at fair market value, and potential decades of appreciation in value land on one final return. Since I published that article,  the question I have heard is: how can families plan ahead? 

Planning matters, especially in our community where four in 10 dwellings in The Blue Mountains are seasonal, and many permanent residents own a getaway somewhere else — Muskoka, Haliburton, or the family camp passed down through generations. Wherever the property sits, the same clock is running. 

Most families have thought about succession. The piece that's easy to miss is liquidity: an estate can be rich in property and short on cash. If the tax comes due and the money isn't there, the property may have to be sold to cover the bill. That's not really a tax problem — it's a cash-flow problem, and it's solvable years in advance. 

In my experience, the tax is rarely what derails these families anyway. Even in close families the conversations about the fate of the family cottage can be difficult. You may need to decide between a child who is at the cottage every weekend and one who dearly wants the place but may not be able to carry the costs. Those conversations don't get easier with time, especially if they’re not resolved before you’re gone. . 

The good news is that the wealth planning toolbox is deep, and each tool solves a different problem. Transferring the property during your lifetime can address the growing gain. Structuring a sale, sometimes within the family, can ease the tax bill. A family trust can hold the property across generations, though it comes with its own set of considerations, including a deemed disposition every 21 years. Insurance can fund the bill outright, though it becomes costlier, or unavailable, as owners age. And the choice of which property to designate as your principal residence may shift the outcome meaningfully. Much has been written on the trade-offs, and your tax and legal advisors are the ones to advise you on which structure works for your situation. 

I work with families to understand the full picture, running the numbers, and coordinating the specialists who put the plan in place. 

If your family's up at the cottage over the next few weekends, consider having the conversation while everyone's at the same table. Then call me, and we'll turn it into a plan. 

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