Written on April 23, 2015 – 5:18 am | by Elaine Blades
Last week Rachel Blumenfeld and I had the pleasure of co-chairing an informative, interesting and entertaining session on cottage succession planning. The presentation was part of the STEP Canada Passport series.
Our presenters were Gwen Benjamin, an estate planning specialist with Wilson Vukelich LLP and Justin de Vries, Principal of de Vries litigation (not to mention founder of this blog). With a planner and litigator on hand, the stage was set for a lively to and fro session.
Gwen began by separating the options into “at death” and “during lifetime”. Gwen then described the choices available under each heading. The “at death” techniques discussed, included:
- leaving the disposition of the cottage to the discretion of the executor(s)
- directing that the cottage be sold by the executor(s)
- gifting the cottage to one or more children
- creating a trust for the cottage + a maintenance fund
- donating the cottage to a charity approved by the Minister of the Environment
Additional options canvassed under the “during lifetime” heading included: transferring to a not-for-profit corporation and gifting the residual interest to a child or children while retaining a life interest.
Gwen went to great lengths to explain the technical nuances of the various planning options while outlining the inherent pros and cons of each. Notwithstanding, it seemed Justin had a case or story to undermine pretty much every option. For example, Justin pointed out:
- the myriad of problems that can accompany shared ownership
- the difficulty in establishing a viable maintenance fund
- the issues inherent in valuing a cottage
- what can happen when a failed marriage and irrevocable trust collide
- the pitfalls of the bidding process: “It is difficult to think of a bidding process that does not alienate at least one child”
- how wild cards such as proprietary estoppel, dependant support and constructive trust claims can muddy the lake waters
Justin reminded us that these problems are often compounded by the fact that there may not be a “reservoir of love” among the siblings.
The session ended on a more positive and constructive note as Gwen and Justin offered tips for avoiding litigation. Advisors should encourage clients to:
- discuss plans with their children; talk early and talk often
- be realistic
- give serious thought to the various options (including selling the cottage to a third party)
- develop a comprehensive plan
Thanks to Gwen and Justin for an informative and thought-provoking session!
p.s. To see what the “Estate Planning Board of Canada” (by way of This Hour has 22 Minutes) has to say about cottage succession planning, click here.