This is the weekend that Canadians look forward to as soon as the weather starts warming up. Recognized nationwide as the first real long weekend of the spring (the one when the weather is hot enough to really enjoy it), many Canadians head out to cottage country. Victoria Day weekend, also known as May Two-Four Weekend, is upon us.
And while most people are excitedly looking forward to the next three days of rest, relaxation and probably partying too, QMI Agency’s Sharon Singleton reports upon a sombre note in today’s Toronto Sun. People love their cottages but often make no plans for them once they pass on, she writes in her article.
Yes, no one truly likes to plan for what happens when they die, but this seems to be a growing point of neglect among cottage owners. According to Singleton, it can become very costly to not plan for the succession of your holiday home.
Elaine Blades, director for Estate and Trust Products & Services at Scotia Private Client Group, believes that this has a lot to do with the sentimental attachment than many people have towards their cottage homes.
Says Blades: “People don’t know how to address the problem. There are often technical issues, family issues and emotional issues involved. Whereas most people are quite happy to buy and sell their home in the city and take the money, the cottage tends to have that special place in our hearts.”
Apparently, the fond memories that take place at the cottage make it that much harder to think of parting with it. Meanwhile, cottage prices have been going up in the post-recession era. As Singleton points out, this adds to the difficulty of the decision to sell the property as many cottages have been in families for generations. They may also be subject to large capital gains taxes if sold.
Explains Singleton: “Cottages don’t benefit from capital gains tax exemptions available on the primary residence. There are also probate taxes in every province except Quebec that vary from region to region, with the highest set in B.C. at about 1.4% of the value of the estate.”
Shockingly, with a tax burden this large, some may have to sell off their cottages in order to pay the debts. Blades suggests taking out a life insurance policy for the estimated amount of the tax bill. With no tax on the policy, the life insurance benefit should be enough to cover the estate taxes.
This isn’t the kind of fun stuff that one wants to think about this weekend, is it? But it is an important concern that should definitely not be overlooked by cottage owners. For the most part, many simply wish to pass on their cottages to their children. The concern here is that the children may not necessarily want the property or they may not be able to financially cope with the maintenance bills.
Our suggestion is for everybody to enjoy their Victoria Day long weekend. It is a time for fun and enjoyment of the spring weather and country atmosphere. But when you come back from your holiday, you may want to begin planning for the future of your family’s favourite long weekend destination.