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The Cottage Conversation: Keeping the Lake in the Family

If you’re reading this from a dock somewhere north of the 401 lucky you. And if you’re a cottage family, you already know: the cottage isn’t a property. It’s where your kids learned to swim, where the same board games come out every rainy afternoon, where three generations somehow fit around one picnic table.

Which is exactly why it’s often the hardest asset in the entire estate plan.

The conversation most families put off

I’ve sat with many couples who own a cottage worth far more than they ever imagined when they bought it. They want it to stay in the family. Their kids say they want that too. And yet the actual conversation who gets it, who pays for it, what happens when one sibling uses it every weekend and another lives in Calgary keeps getting kicked down the road like a beach ball.

Here’s the truth: the cottage conversation is only awkward once. Avoiding it can be painful for a generation.

The tax bill nobody budgets for

A cottage is typically a secondary property, which means when it’s sold or passes on, there can be capital gains tax on the growth since purchase. For a cottage bought decades ago, that growth and the tax on it  can be substantial. One bit of welcome news: the proposed increase to the capital gains inclusion rate that had so many cottage owners worried was cancelled last year, so gains remain 50% taxable. But even at that rate, a large unplanned tax bill can force the very sale the family was trying to avoid.

The good news? There are real planning tools here: deciding thoughtfully which property claims the principal residence exemption, using life insurance to fund the future tax bill so the kids don’t have to, gifting or transitioning ownership during your lifetime, or setting up structures that spell out how siblings will share costs and time. The right answer is different for every family and it involves your tax and legal advisors too but every one of these tools works better with time on its side.

Start with the human questions, not the tax ones

Before any structure or strategy, I encourage families to answer three questions together, ideally at the cottage itself:

Who truly wants it? Not who feels obligated who genuinely sees themselves opening it up every May?

Can they afford it? Property taxes, the new roof, the dock repairs. Loving a place and being able to carry it are different things and there are ways to help with that gap, if we plan for it.

What would Mom and Dad consider “fair”? Fair rarely means identical. If one child gets the cottage, what balances the scales for the others?

This summer’s homework

You don’t have to solve it all by Labour Day. But if the cottage matters to your family, let this be the summer the conversation starts. Bring it up over corn on the cob. Then bring what you heard to me, and we’ll build a plan that keeps the lake and the family together.

Warmly,
Jen

“Wealth isn’t just about your money. It’s living along the way.”

Jennifer Jackson  |  (519) 640-7643  |  jennifer.jackson@cibc.ca  |  jenniferjackson.ca