Relaxing in a lakeside cottage is a quintessential Canadian experience. For many families, their cottage property was purchased years—and in some cases, decades—ago, and as the family structure has evolved, questions may arise about how to share it fairly.
Ensuring a clear and current understanding of ownership and usage across generations will help make family time at the cottage more enjoyable and harmonious. A cottage sharing agreement negotiated and implemented while parents are still actively involved may be just what your family needs.
This practical agreement details agreed-upon guidelines for transferring cottage ownership and control while keeping the property in the family.
Specifically, the agreement can help ensure:
Ideally, all cottage sharing agreements should be made between active parents and their children to avoid surprises or tension after parents pass on and the will is read. Therefore, the more complete a cottage sharing agreement is, the better it will serve the family.
Here are a few points to consider and include in the agreement:
A cottage sharing agreement process is designed to proactively deal with issues like these, to avoid possible future friction.
When it’s time to pass legal ownership to the next generation, a cottage sharing agreement can help clarify the process. Without an agreement, any owner can apply to the court to have the property sold and their share paid out. With an agreement in place, owners agree to give up this legal right to force a sale.
As mentioned, the cottage sharing agreement should provide a safe inheritance path. Some questions to think about include:
A cottage sharing agreement can help effectively address the inevitable issues of inheritance.
No matter how cooperative children may be, issues will always arise from different opinions. Therefore, a prime purpose of an agreement is to provide ways to prevent these from developing into full-blown family disputes.
Differences of opinion amongst owners on how to proceed may best be decided on with a simple majority vote. This tends to work well for non-critical decisions such as redecoration or usage. However, more complex issues, like additions to the cottage or a sale to non-family members, may require unanimous approval. An agreement may also provide for amicable approaches like mediation.
Many cottage sharing agreements provide a family council meeting, a routine time or date for family members/owners to discuss and decide on cottage matters. These are generally annual meetings held in winter and include discussions about setting a budget for operating expenses and agreed-upon repairs and improvements.
If the cottage sharing agreement provides for periods of exclusive usage, then the family council is the most appropriate time and place to determine who gets which block of time. Significant matters, like when to schedule repairs, decide on improvements, and budget appropriately, can also be covered during a family council. The council can also choose how to allocate responsibilities for the upcoming year, including bill payments, opening and closing, sharing chores, etc.
Even the most carefully thought-out cottage agreements will not prevent the occasional sibling disagreement or family friction. The goal, however, is to diffuse most problems before they become an issue.
Cottage succession planning may involve several experts to get the job done well, including wealth advisors, appraisers, and estate and trust professionals. The agreement is a legal contract, so starting the process with a lawyer who can identify the issues, provide recommendations and a draft agreement to discuss with your family will save time and avoid trouble.
Start the conversation today.
Find out how Enriched Thinking ® at Scotia Wealth Management can help you build a Total Wealth Plan tailored for you, your family, business, and future.
This publication has been prepared by The Bank of Nova Scotia for Scotia Wealth Management clients. It is for general information purposes only and should not be considered or relied upon as personal and/or specific financial, tax, pension, insurance, legal or investment advice. We are not tax or legal advisors, and we recommend that individuals consult with their qualified advisors, including tax and legal advisors, before taking any action based upon the information contained in this publication. The opinions and projections contained in this publication are our own as of the date hereof and are subject to change without notice. Scotia Wealth Management is under no obligation to update this commentary, and readers should assume the information contained herein will not be updated. While care and attention has been taken to ensure the accuracy and reliability of the material in this publication, neither The Bank of Nova Scotia nor any of its affiliates or any of their respective directors, officers or employees make any representations or warranties, express or implied, as to the accuracy or completeness of such material and disclaim any liability resulting from any direct or consequential loss arising from any use of this publication or the information contained herein. This commentary may contain forward-looking statements based on current expectations and projections about future general economic factors. Forward-looking statements are subject to inherent risks and uncertainties which may be unforeseeable and such expectations and projections may be incorrect in the future. Forward-looking statements are not guarantees of future performance and you should avoid placing undue reliance upon them. This publication and all the information, opinions and conclusions contained herein are protected by copyright. This publication may not be reproduced in whole or in part without the prior express consent of The Bank of Nova Scotia.
— Advanced Planning and Services, Scotia Capital Inc.
Stories of intergenerational wealth transfers fraught with the disasters of family infighting and squandering of family fortunes tend to dominate and darkly shadow those where families were successful, albeit quietly, in transitioning wealth from one generation to the next.
— Scotiatrust®, The Bank of Nova Scotia Trust Company
For many families, cottages are a prized second home, holding sentimental value after a lifetime of special moments and great memories. However, when the time comes to pass on the family cottage to the next generation, doing so without a succession plan to deal with questions and conflicts can be emotionally and financially challenging.
— Total Wealth Planning, Scotia Capital Inc.
After buying a home, cottage ownership is often high on the wish lists of Canadian families.
— Scotia Wealth Management
For many Canadians today, caring for an aging parent or a family member is a defining part of life.
This publication has been prepared by The Bank of Nova Scotia for Scotia Wealth Management clients. It is for general information purposes only and should not be considered or relied upon as personal and/or specific financial, tax, pension, insurance, legal or investment advice. We are not tax or legal advisors, and we recommend that individuals consult with their qualified advisors, including tax and legal advisors, before taking any action based upon the information contained in this publication. The opinions and projections contained in this publication are our own as of the date hereof and are subject to change without notice. Scotia Wealth Management is under no obligation to update this commentary, and readers should assume the information contained herein will not be updated. While care and attention has been taken to ensure the accuracy and reliability of the material in this publication, neither The Bank of Nova Scotia nor any of its affiliates or any of their respective directors, officers or employees make any representations or warranties, express or implied, as to the accuracy or completeness of such material and disclaim any liability resulting from any direct or consequential loss arising from any use of this publication or the information contained herein. This commentary may contain forward-looking statements based on current expectations and projections about future general economic factors. Forward-looking statements are subject to inherent risks and uncertainties which may be unforeseeable and such expectations and projections may be incorrect in the future. Forward-looking statements are not guarantees of future performance and you should avoid placing undue reliance upon them. This publication and all the information, opinions and conclusions contained herein are protected by copyright. This publication may not be reproduced in whole or in part without the prior express consent of The Bank of Nova Scotia.
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