Leaving your cottage to the kids could cost them

We all like the idea that we can pass on our acquired wealth and property to our children but one mortgage lender is warning of the implications. CIBC’s Jamie Golombek says that leaving a cottage in a will can land loved ones with a hefty tax bill which could mean them having to sell the property.

"The first step to the successful transfer of real estate is to initiate an open, honest conversation with your family," says Mr. Golombek. "This is particularly important when planning for the transfer of an asset such as a home or cottage where children's plans for the future might not always align with parents' expectations."

A CIBC poll found that 70 per cent of Canadians who plan to leave assets to their children include real estate in that inheritance. However the lack of discussion, with family and with tax advisors, is a problem. Golombek says that deciding which property should be designated as an owner’s principal residence is important as that home will not attract capital gains tax when disposed of. The principal residence doesn’t have to be the home they live in: “Another property, such as a cottage or even a vacation property located outside of Canada, can be your principal residence," he says.

MBN

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