The longer days and (occasionally) sunny skies remind us that cottage season is once again almost upon us.  A source of great pleasure, the family cottage can also be a source of great angst in the context of estate planning.  While often not the largest asset in an estate from a value perspective, the cottage makes up for its relative value by having the dubious honour of being the asset about which the most planning discussions are had.

Experience has shown, however, that even the best-intentioned parents or grandparents cannot possibly contemplate the myriad of future issues that can arise with respect to the cottage.  And with each passing generation, the issues tend to grow exponentially.  It is indeed the rare case where family members are exactly equal in their usage of, and contributions to the upkeep of, the cottage.  And unresolved, perceptions of unfairness tend to fester.  Unchecked, I have seen situations where the family cottage, once the quintessential symbol of family togetherness, actually serves to drive the family apart.

What does this mean for advisors?  In my experience, it is important for advisors to stress to clients the need to have full and frank discussions with family members about the cottage, and not merely to assume that they “will work things out” when the time comes.  It is also key to remind clients that not all family members may feel the same way about the cottage as do they.  What may be seen as quaint and nostalgic by a parent may be viewed as old and outdated by a child. Understanding the feelings about the cottage the children have may assist in planning decisions. It may well be that some family members do not want to have involvement with the cottage, and saddling them with ownership would be viewed as a liability rather than a gift.  It is one thing to make a decision to purchase a cottage of your own choosing, and quite another to have one foisted upon you by a parent.

I have seen extended families strike a “cottage committee” to deal with issues related to the cottage, be it scheduling entitlement to use, dealing with responsibilities for upkeep and repairs, preparing a cottage “code of conduct”, deciding on purchasing issues for the cottage accessories, and perhaps most importantly, dealing with the inevitable disputes that arise.  Participation on the committee rotates every couple of years.  Involvement of third generation family members also ensures that they have some understanding of the work and responsibility associated with cottage ownership.  It is not just a permanent place to hang out and have fun.

Not to be construed as a cottage nay-sayer, I have also seen many situations where the extended family is able to come up with an amicable arrangement with respect to the cottage.  And again, it is the perception of equity as opposed to actual equity, and the involvement of family members in decisions, that is often the key to a long-lasting “cottage family”.