Family Cottage: How it can cause conflict, give rise to litigation

  • 11 février 2021
  • Harjot Atwal, Beard Winter LLP

"Nature is not a place to visit — it is home."

This quote of Gary Snyder, winner of the Pulitzer Prize for Poetry, aptly describes how many of our law firm’s clients feel about their family cottage properties. Home. Often in the summer months, when thinking back fondly on cherished cottage memories — watching loved ones joyfully jumping off the dock for a splash, or merrily paddling alongside you on the lake — one cannot imagine their lives without the relaxing respite the family cottage home offers.

Yet, in families with multiple children, things can go horribly awry when it comes down to who inherits the cottage. Case law is rife with examples. A granddaughter with an impassioned attachment to the family cottage may want to buy it from the estate, leading her to emotionally try to have her uncles removed as estate trustees when they sell it “unfairly” as in Woolnough v. Dare. Or, grandsons accuse their aunt of manipulating their grandmother in her final years and contest the gifting of the cottage to her in what the court terms “an exercise in appalling cynicism driven by greed” as in Fair v. Campbell (Estate) [2002] O.J. No. 5926. Varied family squabbles abound.

There are some common denominators. Firstly, there is usually a gift. In many cases, the primary assets of one’s estate are the real estate one owns. As parents and grandparents reach their twilight years, it is natural for them to consider transferring the property “to the kids” — whether during their lifetime or through their will.

Secondly, one must think about taxes. If the cottage was bought 20 or 30 years ago, chances are it is worth quite a bit more now than it was back then. Capital gains taxes will apply. Rather than put this tax burden on the youngins, parents and grandparents sometimes consider gifting the property while still alive and paying the capital gains taxes themselves.