Skip to main content
Category

Wills

Aug 25
Love0

Dealing with your cottage in your will and estate

By Estates, Wills
Planning for Cottages in EstatesPlay Video

Cottages are an important part of many families. They’re a place filled with happy memories and have been an annual gathering place for those closest to you. But when it comes time to pass on your cottage, family members may have different ideas about what should happen next and how the cottage should be handled in your will. People often come to us with questions like:

 

  • How do you pass a cottage on to the next generation?
  • Is a cottage trust a good idea?
  • How do we deal with conflicting ideas about what happens to the cottage?

 

Let’s take a look at some of those questions so that you can start the conversation with your family

 

Avoiding family conflict with cottages

Family cottages can cause family conflict if they aren’t handled properly in your will. There are a number of ways that this can happen, but the most common is when one child really wants to keep the cottage but others may not be able or interested in doing so. On the opposite ends of the spectrum is when everyone wants the cottage but on different terms. If you would like to avoid any potential family conflicts arising from your cottage when you pass away, here are some tips:

  • Consider holding a family meeting to discuss what everyone hopes will happen. It may lead to a discussion where everyone can be accommodated, or will at least allow you to identify where points of disagreement might be.
  • Make sure each child knows what was agreed upon by all members of the family before making a decision about how the property will be dealt with after your death.
  • Think about appointing someone else (a trustee) instead of leaving it directly to one person who may have different ideas about what should happen with the property than all other siblings living nearby. We’ll discuss this below.

 

What about cottage trusts?

A trust can be created for the benefit of a specific person or group of people, or for the benefit of a specific purpose. In a cottage trust, the cottage is transferred under your will (or beforehand) to someone who will act as the “trustee” of the cottage. That person, who can be an adult child, another family member, or someone trusted but unrelated, will be the technical owner but they will be holding it for the benefit of others, often family members of the person who has passed away. Cottage trusts are often used to ensure that the cottage isn’t controlled by any one family member and also allows a mechanism to leave funds to ensure that the cottage is looked after for a period of time. It can also be used to temporarily hold a cottage until your children are over a certain age and able to manage the responsibility of a cottage.

 

Trusts aren’t right for everyone

Trusts can be complicated and there are a number of factors to consider when thinking about setting one up. The tax consequences are a major consideration and everyone thinking about a cottage trust should talk to their accountant before they get too far into the process. Trusts are also a more expensive solution to set up than leaving a cottage to someone in your will outright and involve significant planning and discussion.

 

Beyond that, though, a cottage trust doesn’t solve all of the conflict problems that people are concerned about, it only delays them. Trusts have a practical time limit to them in Manitoba and in some other provinces (including Ontario) can have a firm legal time limit to how long they can exist for. This means that when the time limit is up, or some other conditions expire, something will eventually need to be done with the cottage anyway and it will need to be given to someone or sold.

 

Passing on the cottage doesn’t mean that all your heirs need to be co-owners.

The most common way of dealing with a cottage isn’t a cottage trust, but to leave it outright in a will. You can leave the cottage to one person or more than one person, or maybe even have some other options, depending on your wishes.

  • To one heir: If your cottage is going to be passed down to a single heir, then you’ll need to appoint that person as the beneficiary of the cottage in your will.
  • To multiple heirs: You can name more than one individual as a beneficiary of the cottage, with each share being equal or even unequal. It would be important that everyone involved has a very good idea of what that shared ownership looks like, especially between adult children, to make sure that everyone understands what the intention and responsibilities are with that kind of shared ownership.
  • To charity: You can also choose to give the property to a charity. This means that your family will no longer have use of the cottage but may confer a significant tax benefit. You should definitely seek professional financial advice before considering this.

 

Talking with family

Whatever you do, talk to your family about it beforehand and make sure the know the plan so there are no surprises later. They don’t have to like or agree with the plan, but discussions that happen while concerns can still be addressed are significantly better than trying to have a discussion afterwards. If your child loves the cottage, but has never been particularly interested in maintaining it, for example, she might not be thrilled about inheriting a fixer-upper. So how does one avoid these kinds of misunderstandings?

 

  • Start early: It’s a good idea to have this conversation well before you pass away (it’s awfully hard to do so afterwards). While everyone needs time to adjust and process what’s happening when someone dies, talking about who inherits assets while there is still plenty of time can help minimize any confusion down the road. Set a dinner to discuss estate plans, including the cottage. Give everyone some time beforehand to develop their thoughts about a potential plan and what they want. You may be surprised at how much common ground there is around wishes and concerns.
  • Be honest: The best way to set people up for success after you’re gone is by being open and honest with each other now—not only about who gets what, but also why each person should get something at all! For example: “I’m leaving my cottage to my daughter because I know she’ll love it as much as I did,” or “I’m leaving my cottage to my son because he has always been such an integral part of our family.”
  • Seek assistance: A lawyer experienced with cottage challenges can provide answers through the conversation process. Often times an excellent solution can be crafted, so long as you do it within the bounds of what is allowed, and with some guidance on potential pitfalls with a plan. For more contentious families, even a family therapist or mediator who can facilitate discussions may be very helpful in keeping everyone focused and working towards a common goal.

 

In the end…

There are many options when it comes to dealing with your cottage in your estate and it’s important to find a solution that works for you and your family, and not just what seems easiest. It all depends on what your family wants, how much time they want to spend together, and how much they trust each other. The best thing to do is figure out what works best for you and then talk about it with your family so that everyone knows what’s going on.

 

This article is for information purposes only and is not legal advice. You should definitely seek your own counsel about plans that you may be considering. This article is written with Manitoba in mind and may not be applicable in other provinces or countries. Some of the information in this article may not apply to your situation at all so please do not make any plans or decisions based on it exclusively.

 

Gerrit Theule is a partner at Wolseley Law LLP and his primary practice area is in Wills, Estates, Trusts, and Elder law.

Nov 20
Love0

Power of Attorney or a Committeeship

By Committeeship, Power of Attorney, Wills

People often ask the question: “Do I need to get a power of attorney or a committeeship for my loved one?” While the two documents, and powers that they grant, look similar, there are many important differences, and often the situation that you are in will be what determines which one is needed.

 

A Power of Attorney is a document signed by a person that gives authority to another person to manage some or all of that person’s affairs (although it is important to note that it does not remove the ability of the person signing it to manage their own affairs – it just appoints a “helper”). They are often, but not always, used to guard against later-in-life inability to manage one’s affairs whether due to dementia, physical incapability, or simply because it’s easier to have a loved one take care of day-to-day tasks. They need to be made while a person is still competent to make decisions, and are typically drawn up by a lawyer because, unlike a will, powers of attorney can only be witnessed by people in certain professions, with “lawyer” being the most common one. They are often made at the same time as a Will, but unlike a Will, a power of attorney is only valid while the person who made it is still alive, where a Will is only in effect after a person dies.

 

A Committeeship has some similarities and some differences. Like a power of attorney, a committeeship gives another person the ability to manage some of a person’s affairs while that person is still alive. The main difference is that a committeeship is a judge-made court order and they are only issued after someone has lost the ability to manage their own affairs. Because of this, they require sworn affidavits from physicians that the person can’t manage their own affairs, as well as a court appearance before a judge (although typically there is no need for witnesses to be called). This makes committeeships significantly more expensive to obtain than making a power of attorney in the first place – often thousands of dollars – although if the person no longer has the mental capacity to make a power of attorney then it may be the only option for a family member to take control of the affairs of someone.

 

There are some other differences as well: Most often, when we draft a power of attorney, we give as many powers as possible to the person who will be taking on the powers. With a committeeship the powers that are granted are more limited, and sometimes additional orders are required. For example, most powers of attorney are drafted with the option to allow the family member to sell the house if the person can’t live in it anymore. Under a committeeship, the house can only be sold after review of the sale by a judge, resulting in a delay on the sale and increased costs for seeking that review. A power of attorney can also name anyone (over 18, mentally competent themselves, and no an undischarged bankrupt) whereas a committeeship can only be granted to a person who is a Manitoba resident.

 

In the end, it is often far easier on everyone involved to have a power of attorney in place before it is needed. With that said, if there isn’t one in place, it’s important to know that not all is lost and that a committeeship may be an option. Please feel free to talk to us if you have any questions, and let us know if there is any way that we can help with your committeeship or power of attorney questions.

Mar 06
Love0

Will You Make a New Year’s Resolution this year?

By Estates, Wills No Comments

by Gerrit Theule and Tim Brown

  • Originally published in the Wolseley Leaf in January 2017

With the close of 2016 and the arrival of 2017 a lot of us may be thinking about New Year’s resolutions to commit to. New Year’s resolutions are too often the things that we know that we should do but for whatever reason, we haven’t gotten around to actually doing. They are the adult version of the “green vegetables” of our childhood, only now, many of us need to be less concerned with getting dessert and more with our own wellbeing and that of those around us. This year, there is no better candidate for a New Year’s resolution you can achieve than to write a will, especially ( but not only!) if 2016 saw you married, divorced, having kids, or saw the passing of a close relative.

Now, I know what you’re going to say, because I hear it almost every day: “I know that I really should have one but…” Often the reasons are varied but they often boil down to two factors: concern about cost, and not wanting to talk about “it”.

The cost factor is a simple one: just ask. Wills can range in cost, usually in relation to how complex the estate and will instructions are, but basic wills can be very affordable, especially given how much money and confusion they can save your loved ones. Many lawyers place prices for simple wills on their websites and most are happy to discuss their fees upfront with people who ask. In the end, a little bit of money spent on a will can save even what would appear to be the easiest estate a significant amount of money in additional fees. Without a will, a number of forms and procedures may be required to show the courts even basic information such as who should be the one to administer your estate, to say nothing of how your estate should be divided, what should happen to your family business, or where any minor children or even pets should live. If you don’t make a decision, the law will decide for you.  The resulting additional (and avoidable) costs from gathering and presenting information for the courts all too often far outweigh the cost of making preparations ahead of time.  Most importantly, it often doesn’t lead to a result that you’d be happy with.

Talking about “it” is the tougher issue to address, but like so many other New Year’s resolution subjects, not talking about it won’t make it go away. If you want a say in what happens to your minor children, possessions, and money, now is the time to have your say. More than that though, although it may not feel like it, making a will is one of the kindest things that you can do for those close to you. Knowing the “who” and the “what” when you pass away lessens the possibility of confusion and disagreement leading to painful and costly fighting amongst family members.

Certainly 2016 saw more than its fair share of high-profile celebrity passings, but what is more interesting is the news about them that we didn’t see. Even with the media’s constant focus on celebrities, stars with estate values in the tens or hundreds of millions passed away this year with hardly a hint of the kind of family discord that many of us think of when we think of the death of millionaires. The notable exception was Prince who famously passed away last year without a will, leaving his family and estate in utter confusion. The rest, we can assume, passed having made plans for their loved ones to follow, meaning that those closest to them can concentrate on what is really important: remembering their loved one.

Making a will as a New Year’s resolution this year lets you do the same thing for your own friends and family. There is no wondering about what you would have wanted, no agonizing about making sure that they are doing what they should be doing, and no fighting. Yes, like vegetables or the gym, it’s something that you may not really want to do, but in the end it’s good for you and, more importantly, good for those you love. You’ll be happy that you did.

Gerrit Theule and Tim Brown are lawyers and the owners of Wolseley Law LLP

Close Menu