Planning for the Family Cottage: Avoiding Unintended #Tax Consequences 👇

Many Canadians cherish their family cottage, but transferring it to the next generation can trigger significant tax liabilities.

Here’s the issue: When a cottage is passed down, any appreciation in its value since it was purchased is subject to capital gains tax. 

This tax liability is triggered under Section 70(5) of the Canadian Income Tax Act when ownership is transferred at death.

Options to consider: 
🔹 Using Life Insurance: A joint last-to-die insurance policy can provide liquidity to cover the tax bill, ensuring the cottage stays in the family. 

🔹 #estateplanning Strategies: Trusts or gifting strategies can help mitigate tax consequences, though these come with their own complexities.

Example: A client had a cottage valued at $2M, purchased for $200K decades ago. Without planning, their estate would face a six-figure #tax bill. By incorporating #LifeInsurance , you ensure the next generation could inherit the property without financial strain.

Takeaway: Planning is essential to preserve family assets. 

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#CPA #cpacanada #CPAOntario