Yesterday I had the opportunity to attend a seminar by Geoffrey Parker of the Stonehaven Financial Group Inc in Unionville. As a real estate agent in beautiful Haliburton County, I am not directly involved in family matters as people decide the best route for dealing with the family cottage, but I do get to hear lots of stories.
The seminar touched topics such as dissention in the family (when one child of the owner wants to keep the cottage, but other members want to sell and get their shaire), the cottage as part of a will, capital gains, probate taxes and some options for passing the cottage forward to family.
Did you know that a family can hire a facilitator to help come to an agreement? Holding a "family council" is a great idea! Remember that game as kids where everyone sits in a circle and a sentence is whispered, and a completely different sentence comes out the other end? Making sure that everyone in your family understands your intentions with the family cottage is crucial. Word of mouth does not work. Hold a meeting, share your plan, and have everyone hear the same thing. Facilitators are a great tool if there are differing opinions (although, please remember - it's YOUR cottage, not theirs). Facilitators are trained to offer a "safe" environment for people to share their views and concerns. They are not decision-makers and they have no vested interest in the outcome, they simply follow an agenda and ask key questions to get to the route of the situation.
On the topics of capital gains, "gifting", selling for $1.00, leaving a cottage in a will - these were complex with no clear cut answers, and for that reason, I will not go into details here. It is best to consult your lawyer and accountant for advice - but there was one other really neat topic - electing to change your primary residence.
Since you do not pay capital gains on your primary residence, it may be beneficial to elect to switch your designated primary residence in certain years where the cottage has a large increase in value. For example, you purchased your cottage for $200,000 and then either by some crazy market event or by massive improvements, your cottage increased in value to $500,000 in one particular year. For the year that you sell your cottage or you pass away and it becomes part of the estate, it may be beneficial to designate the year of marked value increase as a primary residence year. Sound confusing? It is....and it does not apply to every situation, but it is certainly something to consider!
The best advice I can give at this point? Have a written plan .... make sure your family knows your plan ... and leave it flexible enough that at the time of your passing, it can be altered to ensure the best tax savings to your estate. Above all...preserve the family. These things can be messy and can create bad feelings....clarifying everything now will help preserve the family unit that is your #1 asset!
