Giving the Cottage to the Kids

Thinking about leaving the cottage to your kids? Ask them how they feel about it and keep the following in mind:

What if they don’t get along or have different ideas about how to use the property?

What if they have different income levels? That might mean a difference in their abilities to maintain the cottage.

What if a child divorces? An ex-spouse may be entitled to some of the growth in value of the property.

4 Ways to Transfer Your Cottage *

1.Gift The Cottage While You Are Alive.

If you gift the cottage to anyone other than your spouse, you may have to pay capital gains taxes on its current value. If you expect the value to appreciate significantly in the future, a gift now may benefit you as the future gain will be taxed in your beneficiary’s name.

2.Leave The Cottage in your Will.

If you leave the cottage in your Will to anyone other than your spouse, there may be capital gains taxes on the property. Those taxes need to be paid by your estate, generally before other assets are transferred to heirs.

3.Make Your Beneficiary a Joint Owner.

If you make your cottage a joint asset, the property is directly transferred to the surviving individual, bypassing the estate (and probate taxes).

4.Create a Living Trust.

If you transfer the property into a Living Trust, capital gains would be taxable at the time of the transfer, however, your estate may avoid probate fees upon your death.

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RBC Financial Planning is a business name used by Royal Mutual Funds Inc. (RMFI). Financial planning services and investment advice are provided by RMFI. RMFI, RBC Global Asset Management Inc., Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec.

* The information above is intended as an overview and does not include complete information on tax laws and legislation.

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