What Happens to the Cottage?
The family cottage is rarely just a property — it's memories, tradition, and a place that holds generations. But it's also a significant taxable asset. When it passes to the next generation (or at the second spouse's death), it's treated as a 'deemed disposition': the CRA assumes it's been sold at fair market value, and capital gains tax becomes payable. For a property that's appreciated over decades, that bill can be large enough that the only way to pay it is to sell the cottage itself.
Watch: What happens to the cottage?
Featured video coming soon
Taivi Tayler on cottage succession and the capital gains tax that often forces a sale.
Taivi Tayler on cottage succession and the capital gains tax that often forces a sale.
Why the cottage is different from the family home
Your principal residence can shelter capital gains under the principal residence exemption. A cottage is usually a second property, so the exemption either doesn't apply or must be shared between two properties. That means decades of appreciation — often the single biggest gain in a family's net worth — becomes taxable at exactly the moment there's no salary or income to pay it from.
The cash problem
An estate can be asset-rich but cash-poor. The cottage may be worth a great deal, but tax bills are paid in cash. Without liquidity set aside — insurance, a segregated fund, or a planned sale structure — executors sometimes have no choice but to list the cottage. Planning ahead is how families keep the property in the family instead of selling it to settle the tax.
Where plans go wrong, and what to do
Decades of cottage appreciation taxed as capital gains
Estimate the gain early and structure a funding source for the eventual tax bill.
Estate is asset-rich but cash-poor
Use life insurance or a designated fund to provide liquidity at the exact moment tax is owed.
Multiple children, one cottage — and disagreement
Build a succession and ownership plan that aligns with your wishes and the children's circumstances.
Sharing the principal residence exemption between two homes
Decide deliberately which property claims the exemption to minimize total tax.
This is exactly what the check-up covers.
In about 3 minutes you'll see where this issue sits in your own plan — then book a free review with Taivi to talk it through.
Or call Taivi directly: 1-866-550-6932