Nearly half the homes in The Blue Mountains are seasonal properties — cottages, ski chalets, and vacation homes. According to StatsCan’s 2021 census only 59% of private dwellings in the Blue Mountains are occupied by permanent residents. This means many families own a second property, and inevitably, the question arises: what is the long-term plan for your cottage?

 

Perhaps the kids don't come up as often as they once did. Maybe you've been thinking about selling, or you’d like to keep the property in the family but aren't sure how to do so without creating complications for everyone involved.

 

The tax bill most families don't expect.

At death, the CRA treats a cottage as if it were sold at fair market value unless it is transferred to a surviving spouse or common-law partner. If the property has appreciated significantly since you bought it — and in this area, most have — that capital gain is taxable on the final return. For a cottage purchased decades ago, this tax bill can be substantial and often comes as a surprise.

 

You can only designate one property per year as your principal residence.

For families with both a home and a cottage, that means choosing which property receives the principal residence exemption in any given year— and the answer isn't always obvious. If the cottage has appreciated faster than the home, it might make sense to designate it for some of those years. But that decision has ripple effects, and getting it wrong is expensive.

 

There are options — but you need a plan.

There are different strategies to consider, such as joint ownership with your children, establishing a family trust, purchasing life insurance to cover the tax bill, or a structured sale over time. Each option has its own benefits and drawbacks depending on your family circumstances, your other assets, and your goals. There is no one-size-fits-all solution, but failing to plan can leave your family with significant challenges.

 

If the cottage question has been on your mind, it's worth having a conversation before the summer gets busy. I help families in this community work through exactly this — no obligation, just clarity on your options – give me a call or email me.

 

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. This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. Clients are advised to seek advice regarding their particular circumstances