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Suggestions for Sharing the Family Cottage

Often the decision to give ownership of the family cottage to one child over the other or others is not an option for many parents.

For many families, the cottage is a place where the emotional value attached to the cottage is significant.  Barbara Benoliel, a professional mediator, who spoke about cottage succession on CBC radio in May; said “What we are really challenging is the family identity when we say this actual memory or this thing we all share is going to now belong to one person.  Would you give your family history to anyone?”

If your children want to be co-owners of the family cottage, it is critical that a cottage agreement be prepared with their involvement.  A lawyer is often a helpful advisor in preparing this document.  A cottage agreement should seek to address some or all of the following!

  •         Use of the property
  •         Having guest visit
  •         The sharing and payment of expenses
  •         Maintaining, opening and closing the cottage
  •         Making improvements to the cottage
  •         Selling or transferring the cottage
  •         Using the cottage as collateral for loans
  •         How to settle disputes or dealing with situations when a co-owner does not pay their fair share

The cottage agreement should deal with splitting up the time spent at the cottage.  Maintenance during the visits…i.e. grass cutting, watering and gardening should also be included during the time allocated to co-owners/family.  Issues around co-owners children using the cottage and smoking (or not) should also be addressed in the agreement.

Maintenance and cleaning of the cottage is also an issue to include in an agreement.  You will need to set a budget which will include all annual maintenance costs, road costs, property taxes, opening and closing of hot tubs, removal of boats and winterizing/storage/shrink wrap, emergency repairs, replacement of items…i.e. BBQ’s, renovations, lawn mowing and garden maintenance and replacing consumables such as cleaning supplies, paper towel, toilet paper, laundry soap, dishwasher soap and cleaning of the cottage at the end of the stay.

Life insurance can often be used to create a cottage maintenance fund which can be invested to provide an annual income to cover the cottage expenses each year.  If $500,000.00 were invested at 3-4%, the annual income would be $15,000.00 to $20,000.00/year.  If the cottage is sold at a later date, the money in the cottage maintenance account can be divided among the co-owners.

Have the conversation with your family and have the children involved in establishing an agreement of co-ownership.  Get advice from your lawyer, financial planner and/or a life insurance professional.

Talk to your financial advisor. Get in touch.

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