Transitioning the Family Cottage to the Next Generation

Multi Generation Family sitting around a campfire roasting marshmellow

Appropriate planning to transition the family cottage is important to ensure your future generations are able to continue to enjoy it.

When transitioning second properties to loved ones, whether voluntarily or via an estate, for tax purposes there is a deemed disposition of the property at fair market value.

The disposition results in income tax on the accrued appreciation, albeit there is no cash transaction to pay the liability.

Historically, many of these transactions were performed at a nominal value instead of fair market value to avoid realizing a gain. The Canada Revenue Agency (CRA) is aware of this and in recent years has been devoting resources to track these transactions in order to collect the taxes.

The implication of transferring property at a nominal value is that the transfer is still deemed to be at fair market value, causing double taxation – 1) the transferor/estate pays tax on the accrued gain to date, and 2) the transferee will also incur tax on the same gain when they transfer or dispose of the property themselves as their cost base is limited to actual amount paid.

There are strategies to plan funding the tax liability, such as investment savings, family trusts and life insurance. The appropriate strategy for you depends on personal factors.

Discuss your situation with your wealth advisory team to ensure your cottage remains in the family for future generations.

If you are not comfortable with your current strategies or would like a second opinion, feel free to contact one of our expert advisors at 905-891-6052 or at

All examples are for illustrative purposes only and are not intended to provide individual financial, investment, tax, legal or accounting advice. This material is for general information and is subject to change without notice. Every effort has been made to compile this material from a reliable source. However, we cannot guarantee that information will be accurate, complete and current at all times. Before acting on any of the above, please make sure to see a financial professional for advice based on your personal circumstances.

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