Cottage Succession

Family cottages often represent great memories. The cottage can be an important retreat where families congregate in a relaxed environment, developing close relationships with successive generations. Alternatively, the cottage may be an economical vacation spot that families count on year after year. The cottage could be a simple structure on a remote lake, or a compound covering an entire island.

Ownership of a cottage generally begins with the parents holding joint ownership, and assuming responsibility for annual expenses and property upkeep. As families grow, adult children typically help maintain the cottage, and look forward to sharing the cottage experience with their own children. But as the parents age, families need to decide how best to ensure future generations enjoy the cottage.

In order to retain the family cottage through future generations, a number of issues should be considered in advance to ensure a long and enjoyable family experience. The first generation — the parents — could address the cottage as part of their overall estate transition by designing a plan for long-term retention. Alternatively, the parents could bequeath the cottage to the adult children jointly, requiring the children to determine how the cottage would be shared among all siblings.

The most prevalent of these issues is the long-term ownership, and annual and periodic expenses. Expenses include not only the cost of maintenance and annual property taxes, but also the income tax liability that could arise upon the disposition of the property at the time of the parent’s death, and when the property passes between family members in the future.


Different ownership options have different advantages and disadvantages; a great deal of thought is needed as to the long-term structure that best meets the needs of the individuals involved. The following is a list of the typical types of ownership structures.

Structure Description Some Considerations
Tenants in common As tenants in common, each family member owns a share of the cottage, in the proportion initially registered. Each owner has the right to pass the interest in the cottage according to his or her wishes, either while alive or through the last will and testament. Typically, each owner would name the children who stand to inherit the parent’s interest in the cottage as tenants in common. Again subject to the prin- cipal residence rules, the death of each family mem- ber on title to the property triggers an income tax li- ability, creating a tax bill for the deceased’s estate.
The number of tenants in common listed on title will increase as each owner passes and bequeaths the interest to his or her children as tenants in common.
Family trust The cottage could be transferred into a trust with all of the children and (future) grandchildren listed as beneficiaries of the trust. The trustees would be responsible for managing the cottage property and adhering to the rights of the beneficiaries. A trust is deemed to sell its capital property every 21 years, which means there could be a large income tax liability in the trust every 21 years unless the cottage is transferred from the trust to one or more beneficiaries.
Patriarchal or matriarchal approach Title to the property would pass to the oldest child in the next generation, and it would be up to that adult child to hold the property for the entire extended family. This could be considered a bare trust.
Although additional alternatives are available, the extra complexity necessitates exploration beyond the scope of this article. Additionally, issues such as claims against the cottage property by creditors of a bankrupt family member, rights of estranged spouses under provincial family law, and numerous other issues must be considered. Professional legal guidance should be sought.

Agreements with respect to expenses

After a family has reached agreement as to the sharing of expenses and the use of the property, it is helpful to document the decisions in a cottage constitution. The purpose is to clearly specify how expenses and use of the cottage will be shared, with the intention of minimizing conflicts and emotional reactions that might arise from misunderstandings. Agreements are advantageous as they allow the participants to anticipate, in advance, fair and equitable rules that everyone knows and agrees with.

Expense considerations to be addressed:

  • What expenses are shared equally?
  • How is “equally” defined, now and in the future?
  • What expenses are shared by usage?
  • What expenses are paid by the user?
  • How are maintenance and repairs determined? Who determines what is necessary and/or desirable?
  • Who is responsible for paying the expenses?
  • Are funds gathered in advance (i.e., at the beginning of the year)?
  • Do family members recover funds not spent at the end of the year?
  • What if financial difficulties or strained family relations result in non-payment?

Considerations for establishing usage of the cottage:

  • How is cottage time shared across each participating family? (e.g., Should each family take turns picking one week?)
  • When do subsequent generations step into the picture for picking times?
  • Are there common times when all families share time together?

Is there a mechanism for dispositions of ownership interests?

  • Families may relocate and no longer be close enough to enjoy the cottage; they may find after some time that they do not enjoy cottage life; family harmony may no longer exist; or some family members may desire a different type of cottage or location.

Making an agreement work

  • Consider establishing a timeframe for regularly updating the constitution to reflect changing family circumstances.
  • Consider establishing annual family meetings to process decisions and address issues.
  • Consider rotating the appointment of one sibling to chair family meetings.

When the family cottage holds great sentimental value to one or multiple family members, addressing the long-term plan for succession is essential to family harmony.

E.O. & E.


This commentary is published by the Institute in consultation with an editorial board comprised of recognized authorities in the fields of law, life insurance and estate administration.

The Institute is the professional organization that administers and promotes the CLU and the CHS designations in Canada.

The articles and comments are not intended to provide legal, accounting or other device in individual circumstances. Seek professional assistance before acting upon information included in this publication.

Advocis*, the Institute for advanced financial education.

(The Institue”), CLU, CHS, FHF.C and APA are trademarks of the financial advisors Association of Canada (TFAAC).

The institute is a wholly-owned subsidiary of Advocis. Copywrite TFAAC. All rights reserved. Unauthorized reproduction of any images or content without permission is prohibited.

Copywrite  ISSN 0382-7038

Contributors to this edition:

James W. Kraft, cpa, ca, mtax, tep, cfp, clu, ch.f.c.
Deborah Kraft, mtax, tep, cfp, clu, ch.f.c.

About The Author

Mark Schneider
Mark Schneider is one of Canada's leading Chartered Financial Planners. For over 30 years he has helped hundreds of regular Canadian families grow small fortunes through consistent planning and wise advice. He holds the following designations: CFP, CLU, CHFC, CFSB

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