Estates & Wills & Trusts

Family meeting can prevent cottage inheritance disputes

By Staff

In the first instalment of a four-part series on transferring ownership of the family cottage, Winnipeg wills and estates lawyer Cynthia Hiebert-Simkin discusses why communication is so vital.

The family cottage demands extra attention in a testator’s estate plan thanks to the extra emotional baggage that comes with the property, Winnipeg wills and estates lawyer Cynthia Hiebert-Simkin tells

Hiebert-Simkin, partner with Tradition Law LLP, Estates and Trusts, says the family home is less often a source of tension among the remaining children when parents pass away than one might think.

“Children will often have their own homes, so there aren't many just waiting to get the house that mom and dad lived in. Often, the assumption is that it will be sold,” she says. “But the cottage is different.

“There’s an emotional component to it that you don’t get with any other asset because of all the memories you have of going there in the summer and spending time with the family in a more relaxed setting,” Hiebert-Simkin says.

For that reason, she suggests parents talk early and often with their children about what should happen to the cottage to avoid a fight after they’re gone.

In many cases, Hiebert-Simkin says a family meeting devoted to the subject will challenge parents’ assumptions about the fate of the property.

“When cottage owners come to me, they will frequently have set ideas about what should happen. But if they’ve never shared those thoughts, it can cause a lot of problems when they die and the children realize those plans could never work,” she says.

For example, Hiebert-Simkin says not all children may actually have the desire or practical ability to inherit a share in the family cottage, for a variety of reasons.

“There’s a difference between wanting to own and being able to,” she says.

In some cases, beneficiaries are not in a financial position to handle the ongoing operation and upkeep of the property, while others who have moved to other jurisdictions, or have already purchased their own cottage, may also be unwilling to make the required commitment.

“At the very least, you need to find out who is interested in having it,” Hiebert-Simkin says. “Sometimes, you can start with a lawyer present, and then follow up about what ownership means in terms of expense and responsibility.”

In addition, a family meeting can help anticipate, and possibly head off, future resentment between co-owners, says Hiebert-Simkin, adding that time-sharing and upkeep issues are a frequent cause of complaint.

“Is it fair to share costs equally when one child lives in B.C. and can only use it for a couple of weeks in the summer? Who decides who gets to use it in prime weeks? Who opens up and closes the cottage at the end of the season? Who’s doing all the unglamorous work of arranging to have the septic tank cleaned and the dock fixed?

"If there’s no discussion in advance about any of these issues, it can cause problems," she says.

Layering on a lifetime’s worth of family dynamics can only add to the complexity of the situation, Hiebert-Simkin adds.

“It can be a challenge to share ownership if the siblings don’t get along well,” she says.

Though each situation will differ depending on the temperaments of the parties involved, Hiebert-Simkin says there is no issue too small for some shared cottage owners.

“If one child buys special food and another eats it, or if one is always buying the toilet paper, these are the tiny things that can start to drive you crazy over time,” she says.

When co-ownership is off the table, Hiebert-Simkin says testators have a variety of options for addressing the future of the cottage in a will. For example, they could set out a process for determining the fair market value of the property, along with a bidding procedure for interested parties.

Another option is to place the cottage in a trust with rules for its operation and what happens if a beneficiary wants to opt out of the arrangement.

However the asset is transferred, Hiebert-Simkin says testators must consider the tax consequences, since capital gains tax will be payable by the estate, rather than individual beneficiaries, creating potential inequities for those taking their inheritance from the residue.

“There’s a lot for people to talk about,” she says. “I appreciate people want to believe they live legally simple lives, but these are very important issues, and it’s not going to benefit a family if the owners of a cottage have not turned their minds to the problems that might arise and how they might be resolved.”

Stay tuned for part 2, where Hiebert-Simkin will discuss the cost of a cottage estate plan.

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