Fall officially arrives on Monday. School has started, the leaves are turning colour, and for many families, it’s time to think about closing the cottage for the year.

As estate planners know, the cottage is not an ordinary asset. It’s a special place where memories are made and traditions are passed down, and as a result, planning for its succession can be challenging. Often, individuals will include a trust in their Will that holds the cottage for the benefit of their family members. While a trust can be an effective way to manage and transfer ownership of the family cottage, it requires careful planning to get it right.

While the drafting of a cottage trust is a topic too big to thoroughly cover in a blog post (it could fill a book – or at the very least a few chapters!) I wanted to flag a few things that should be considered and discussed with clients when drafting a testamentary cottage trust:

• Trustee – consider who will be an appropriate trustee (or trustees) of a cottage trust. In a large family, should there be representation from multiple branches of the family? Is there likely to be disagreements among family members, such that it would make sense to appoint a neutral third party? Should the trustee be compensated for acting, and if so, from what funds?
• Beneficiaries and use of the property – who is the trust being held for? How will use of the cottage be shared – as they agree, or should more structured terms be built into the trust? Can the beneficiaries rent out the property, and if so, what happens to the income? Should there be a requirement that beneficiaries enter into a co-ownership agreement before an ultimate distribution?
• Maintenance and costs – how will costs associated with the maintenance of the cottage be paid for? Should there be a fund set aside in the Will to cover these costs? Who will be responsible for completing the actual maintenance? What about capital improvements – should they be allowed? Who determines if they are necessary?
• Duration of the trust – is the intention of the trust to hold the property for as long as possible, or to give family a short test-run before making a distribution? Taking into account the ongoing management required of a trust, how long can the trust realistically be maintained? If the trust is to be held for a long term, how will the deemed disposition be dealt with every 21 years? How will the cottage eventually be distributed once the trust is completed – who is likely to be able to enjoy the use of the cottage at that date?

Wishing everyone a lovely final summer weekend!