How to pass the cottage on to the next generation

May 1, 2019

As you age, cottages can become a source of stress as you start to ponder how to pass it on to the next generation. When that time comes, there are a variety of methods that can be used; however, we would like to highlight four common strategies in regards to estate planning and transitioning:

  1. Transition the cottage on before you pass

This is a common solution that works perfectly if you no longer intend to visit or use the cottage and if you have a family member that can take ownership of the property. When you gift the cottage now, you pay tax on capital gains that have accrued from when you first purchased the cottage to the fair market value of the property when you gave it to your child.

  1. Gift it in your will

You can leave the cottage to family members in your will. You have a couple of options: you can name your heirs in your will, who become co-owners of the asset, or you can create a trust that owns the cottage and each heir gets a portion of the trust.

  1. Use insurance to help

A capital gains tax burden is the most common burden when passing the cottage on to family members. One way to address it, is to allocate funds from a life insurance payout. You can simply state that the funds from a life insurance policy should be used to pay the capital gains tax owed by your estate, or you can make the cottage trust the beneficiary of the insurance policy.

  1. Sell it

Sometimes the simplest option is to sell the cottage and gift the proceeds to your family. To do this, you can stipulate in your will that upon your death, the cottage should be sold and, once all taxes and transaction costs are paid, the remaining money should be split among your family members. The only catch? The cottage will not be around for generations within your family.


Tax planning strategies are an important consideration when talking about your retirement and estate considerations. That’s why the Allan Bush Investment Team at CIBC Wood Gundy has an integrated group of specialists that are willing to help build you a consolidated plan that meets all your wealth management needs.