Vesta Advice Series – December 8, 2025

I love living in the Shuswap – it has been my chosen home for over a decade, and I wouldn’t have it any other way.  Although many financial and estate planning concepts are applicable across the entirety of Canada, there is one question a little more common in the Shuswap: “How can we leave our family cottage to our children effectively?”

Most clients who have begun looking into this question (or who have received a heads up from their accountant) have learned that planning to leave a second property behind is much more complicated than it appears at first glance.

When researching other articles that have been written on this topic, I noticed that most articles focused solely on the tax planning component of this issue.  Unfortunately, this often overlooks the other critical factors of how can we make this equitable, fair, and appreciated by our beneficiaries?

My goal in this article is to highlight some of the more common issues that can arise with estate planning around a vacation property, with an emphasis on the importance of proper communication.  The aim is to create an estate plan that reflects the needs of you and your beneficiaries, leaving a positive legacy that minimizes stress.

Before moving on, a disclosure: this article is not intended as legal or tax advice and instead aims to draw your attention to estate planning issues common with vacation properties.  I have oversimplified some areas, ignored some potential strategies, and made assumptions that wouldn’t be common in a real-life situation.  If you believe that some these issues may pertain to you, seek professional advice.

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Meet the Jones Family – A Case Study

To best illustrate some of the complexities of this topic, allow me to introduce the fictional Jones family.

Leo and April Jones are 75 years old and are trying to create a plan on how to pass down their family cottage in the Shuswap to their three children.  They have jointly owned their cottage for about 30 years, and it was purchased for $100,000.  Many fond memories were formed at the cottage, and they still host their children and grandchildren there at least once every summer.

Their oldest son Don is married with two teenaged children, living in nearby Kamloops.  He loves going to the lake and looks forward to it every year and stays in regular contact with his parents.  Although Don’s family is financially stable, they rely on the cottage to be their usual vacation destination each summer as an affordable opportunity to get away.

Their middle daughter, Raph, lives in Kelowna with her long-time partner.  They do not have any children nor plan to have any.  Both Raph and her partner attend most family holidays and enjoy additional regular vacations and an affluent lifestyle.

Their youngest son, Mike, moved to Toronto for work ten years ago and has a lucrative career that keeps him busy.  He married seven years ago and has three children with his wife.  Although they do not make it to every event or holiday, Mike and his family try to make it to the lake every summer to enjoy the Shuswap and see family.

Leo and April were told by their realtor friend that they thought their cottage would sell for about $2,000,000 in today’s market.  They did not keep any receipts or track any costs that they have put into the cottage over the previous thirty years.  They recently sold their primary residence to move to an assisted living home and purchased an annuity to completely cover their living expenses for the remainder of their lives.

Currently, their mirrored wills state that their assets should first go to the surviving spouse and otherwise be divided equally between their three children.

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The Tax Part

Although the case study above has numerous planning challenges, it is often the large tax bill that draws the most attention.  To prevent this article from ballooning an additional 20 paragraphs, I’ll keep this section to identifying the cause of the issue: the deemed disposition.

When the last of Leo or April passes, the CRA will treat their cottage as if it were sold for its fair market value (FMV), assumed to be $2,000,000 from our information above.  This disposition would also be triggered if they transferred ownership to their children earlier or moved it into a corporation or trust (with some exceptions.)

When this occurs, there will be a capital gain on the property of $1,900,000 calculated as the Fair Market Value (what it was worth on the market) minus the Adjusted Cost Base (what it cost them.)  This gain is currently taxed at an inclusion rate of 50%, meaning taxes would need to be calculated as if earning $950,000 of income.  Although there are several factors which can influence the final cost in taxes, it is reasonable to assume a tax bill of at least $400,000 in this scenario.

Often, as in our example above, this leads to a dilemma for our beneficiaries – where are they going to get $400,000?  Unless the beneficiaries are willing and unable to self-fund the tax bill, they would likely be forced to sell the cottage to cover the taxes.

Although there are many strategies that we can employ to minimize the tax or plan for this expense, know that there is no silver bullet or special maneuver to eliminate this issue.  If you believe you are on a collision course with a similar issue, I recommend you seek professional estate planning and tax advice.

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The Personal Part

As mentioned at the top of this article, tax planning often overshadows a question that is just as important: How can I make this work best for my beneficiaries?

Many clients have trouble imagining that their children do not share their views on their beloved vacation property, or do not consider the likelihood that their feelings may change once their parents are gone.  A sad reality is that many fond memories of a family cottage can become tainted by the surviving beneficiaries as disagreements form around money, usage, and perceived unfairness.

Consider some of the common situations which may occur for the Jones’ once Leo and April have passed away:

• Mike wishes to sell the property, as he no longer wants to spend his summers flying across Canada now that his parents are gone. Don and Raph wish to hold on to it and believed that their majority ownership would prevent the sale.  Mike files a lawsuit to force the sale, as he feels he has been taken advantage of.
• Raph and her partner wish to invite a group of their friends to the cottage for a birthday party with no children allowed, which happens to be in the middle of summer when Don was hoping to take a family vacation. This begins an argument over usage that lasts years.
• A hefty maintenance bill for $10,000 is due, and Don is upset when his siblings refuse to contribute a third of the bill each. They reason that he uses the cottage significantly more than them – Mike didn’t even make it out last year – and he should foot most of the bill.  Don is outraged and feels taken advantage of, lashing out about how “cheap” his siblings are despite having more money than him.
• The siblings receive a letter from a neighbor, whom was on good terms with their parents, expressing their disappointment with how poorly the property has been maintained and upset that the lawn is not getting mowed weekly. They do their best to appease the neighbor but feel friction and unwelcome whenever they visit the cottage in the future.

All the scenarios above happen often, as well as many more.  Although each requires a different solution and some planning, they all begin with the same first step: communicate with your beneficiaries.

It can be uncomfortable to think of what may go wrong, but planning and addressing the real needs of your beneficiaries is where the true value of legacy planning exists. It is difficult to truly recognize that the right course may be to sell your property on your passing, or possibly even give a vacation property to one child instead of the other(s).  However, with proper discussion and planning, it is possible to find solutions that are equitable and appreciated by everyone, leaving behind warm memories and a legacy you can be proud of.

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I hope that I have demonstrated some of the complexities that come with planning around a vacation property, and encourage you to speak to each other, your beneficiaries, and professionals as needed.  Every family is different, and thus so is every financial plan – make sure that you have one suited to you.

Thank you for reading, and I hope this was valuable.  Should you have any questions, please reach out to me directly with the contact button below.  Thank you for reading!

 

 

 

 

 

References

 

Succession Planning for the Family Cottage

Family Cottage Succession Planning

Tax Planning Strategies for Cottage Owners

Cauwenberghe, C. V., & Evans, B. (2024) Wealth Planning Strategies of Canadians 2025. Thomson Reuters