TORONTO, May 3 /CNW/ - Adult children need to start the ball rolling on cottage succession planning so that black flies and re-painting Muskoka chairs are sure to be the only stress points around the cottage or cabin this summer, according to Scotia Private Client Group (SPCG).
"While the possibility of inheriting a cottage is a nice problem to have, it's important to start the conversation early to avoid disappointment and disputes down the road," says Elaine Blades, Director for Estate and Trust Products & Services at Scotia Private Client Group. "So, while children may feel awkward broaching this subject with their parents, it's in everyone's best interest. In fact, many parents find it a relief to have the discussion out in the open, upfront."
When having the conversation, Ms. Blades advises families to determine the ideal outcome and work back from there. "There's no right answer here, so it's important to look at the destination. Look at what the family wants to have happen and work backwards while working with an expert who can anticipate all scenarios to help get there.
"Sentimentality around the family cottage or cabin doesn't have to calculate into stressful emotions. It's all about discussing, planning and seeking the right expert advice," adds Ms. Blades. "By starting the succession conversation, adult children often find they're doing their parents a favour. Have the discussion and have it now."
The unknowns and potential financial implications can be daunting to all parties:
- Unexpected costs can be significant including probate fees, capital
gains tax, land transfer tax
- Gifting now, bequeathing, or selling to the kids - what's the best
course for all concerned?
- What's the best legal structure? Joint title (joint tenancy or
tenants in common), sole ownership, held in trust?
- How can you treat the kids "equally" when not all have an interest in
and/or the ability to enjoy the cottage?
- Insurance strategies - what are they and what role can they play?
- Availability of principle residence exemption - how does this work
and what are the tax implications?
"When it comes to the cottage or cabin, family members are usually emotional stakeholders. So for a plan to succeed, it is essential to share and discuss openly," says Ms. Blades. "There is a myriad of scenarios and options which an estate planner can anticipate and advise on - and tailor both soft and hard solutions."
In addition to starting the conversation now, Ms. Blades advises:
- Seek out options that address the entire family unit's goals so as to
provide customized, tax-efficient solutions.
- Be realistic and strategic.
- There are limits to what you can control. So control what you can.
Seek out expert solutions that go beyond cookie-cutter.
- Seek proactive advice to identify the worst-case scenario: that the
family cottage or cabin may need to be sold. Plan against that
- Cottage succession touches all aspects of wealth management planning
and those plans must be aligned. For parents, there can be
implications for retirement income and philanthropy. For children,
what exactly are they taking on and how does that affect the wealth
they are in the process of building for their family?
"In today's day and age, when families are often more like the Brady Bunch than the Cleavers, families need to seek a full range of expert advice on managing their wealth from those who can anticipate every need and scenario within the family unit," concludes Ms. Blades. "We offer wealth management expertise, but for an investment as loaded with emotion as the family cottage or cabin is, an expert's role of impartiality allows for the best and most practical solutions - as well as many more family memories to cherish."
About Scotia Private Client Group:
Scotia Private Client Group, a member of the Scotiabank Group, provides customized solutions to help high net worth clients build, preserve and transfer their wealth. Scotia Private Client Group provides individuals and their families with tailored, tax efficient strategies that align their investments with their retirement and estate plans to help them achieve continued financial success. For more information, please visit www.scotiaprivateclientgroup.com.
Scotiabank is one of North America's premier financial institutions and Canada's most international bank. With close to 68,000 employees, Scotiabank Group and its affiliates serve approximately 14.6 million customers in some 50 countries around the world. Scotiabank offers a diverse range of products and services including personal, commercial, corporate and investment banking. With more than $507 billion in assets (as at January 31, 2010), Scotiabank trades on the Toronto (BNS) and New York Exchanges (BNS). For more information please visit www.scotiabank.com.
For further information: For further information: Rick Byun, Narrative Advocacy Media, (416) 644-4124, firstname.lastname@example.org; Jane Shannon, Scotiabank Public Affairs, (416) 933-3056, email@example.com