When to sell the family cottage

Discuss transition of ownership with adult children and set clear expectations early.

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The summer cottage, home, or cabin is often the most emotionally volatile of family assets. Whether it’s about the great memories, ownership status, or a refuge from hectic lives, it is held dear across the generations. The generational transfer of the cottage, or its sale, is often traumatic. One family I know struggling with this issue has four third-generation owners for a single property. Great great granddad (generation #1) purchased the land and built the cabin.  Two adult children—the great grandparents (generation #2) expanded the cottage as their young families grew.  Currently the four older adults (generation #3), who have successfully shared the cottage for decades, are in their 70s and 80s. They have begun discussing the next ownership transition. However, each generation has meant more owners and potential owners, and the transitions become increasingly challenging. In listening to their ideas on how to make the transition take place as seamlessly as possible it struck me that one fundamental point had been overlooked.

Generation #3—the four older adults (plus some surviving spouses)—wish to continue to use the cottage for as long as possible. However, due to their advancing age, they need to prepare for either the death or incapacity of one of the siblings before they worry about the next generation. Let’s face it, everyone should do this, regardless of age, but it rarely happens. Without clarification of access and ownership, this is a brewing problem with potential for the younger generation to interfere if their parent is no longer in a gate-keeping role. One set of cousins losing access to the cottage if their parent passes away will undoubtedly create problems. Even if the parent is alive, but is incapacitated, the younger generation may feel they have a right to use their parent’s asset.

Selling the cottage can be the best option. It removes any misunderstanding or wrong expectation about the next generation’s involvement in cottage ownership. Unfortunately, prematurely ending access to the cottage is not ideal.  However, avoiding the issue is more likely to result in a sale of the property under some unhappy circumstances. Consider starting the conversation with the next generation rather than assuming that you know their interests and financial readiness. Position the conversation in a way that removes the sentimentality of the asset so that they do not feel obligated to say they want the cottage, just to avoid hurting the feelings of their parent. An conversation opener like this may work:

We are looking into various ownership options for the cottage. What is your interest in the cottage and would your financial position enable you to act on that interest both for purchasing as well as maintaining it?” 

You might be surprised by the answer. There’s a good chance there is minimal interest in the asset or little resources to purchase even if there is interest. On the other hand, if there appears to be no reasonable resolution for transferring ownership of the cottage there may be increased motivation to proceed with its sale, and any possible guilt about the sale may have been alleviated. Unfortunately this is only the first step in a complex sale or transfer of an asset.

Lee Anne Davies has worked as a consultant for insurance, wealth management, banking and financial education companies. She has a PhD in Aging, Health and Well-being and a Masters of Arts (MA) in Gerontology and Health Studies from the University of Waterloo and an MBA from Athabasca University’s Information Technology Management program. She’s also successfully completed the Canadian Securities Course and the Professional Financial Planning Course. To read more from Davies, visit her blog Agenomics.

2 comments on “When to sell the family cottage

  1. I would agree that selling the cottage at this point would be the best option. Kudos to the four siblings who were able to amicably share the cottage for all those years.
    What we have learned (the hard way) is that joint ownership with right of survivorship is probably one of the worst ways to pass down the cottage (among siblings/cousins). Between the control issues and the capital gains issues that can arise, it’s a nightmare waiting to happen. I know some people will advocate cottage agreements, but how do you ever enforce such a document?

    Reply

    • Thanks for sharing your thoughts about the cottage. I’ve seen a few families try the cottage agreement approach but, as you said, it is not enforceable. If people do try this route I think the first hint is if it’s really difficult to reach agreement this is a sign that it isn’t going to work once it is put in place. That’s the time to sell – before relationships are damaged.

      Reply

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