What's up dock: Tax & estate planning for your vacation property

During the summer months, many families spend time together away from the hustle and bustle of daily living and retreat to one of the "four C's" of summer: the cabin, condo, chalet or cottage. Unbeknownst to you, however, is that lurking under the surface of your idyllic retreat may be a host of tax and estate planning issues that, if not tackled early on, could not only cost you (or your heirs) a lot of cash, but in extreme cases, could force the sale of the recreational property that may have been in your family for generations.

With some professional advice and some advance planning, however, you may be able to mitigate some of these potential problems.

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OTHER ISSUES

This report does not deal with other potential issues on the sale or transfer of your vacation property such as the potential liability for the Goods and Services Tax (GST), and Land Transfer Tax (LTT) in applicable provinces. That being said, a quick word about each is warranted.

Generally, sales of personal-use homes by individuals or personal trusts are exempt from GST/HST.

The Land Transfer Tax rules vary by province. For example, in Ontario, land transfer tax must be paid when real estate is transferred, based on the value paid to acquire the property. If nothing is paid, such as when the property is simply gifted, Ontario would not charge a land transfer tax.

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Disclaimer:
As with all planning strategies, you should seek the advice of a qualified financial advisor or tax advisor to discuss planning opportunities for recreational properties.

Jamie Golombek, CA, CPA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Private Wealth Management in Toronto. As a member of the CIBC Retail Markets team, Jamie works closely with advisors from CIBC Private Wealth Management, Wood Gundy, Imperial Service and other partners to support their high net worth clients and deliver integrated financial planning and comprehensive advisory solutions. Jamie writes a weekly column called "Tax Expert" in the National Post, which is also syndicated across various CanWest newspapers in Canada. In his spare time, Jamie teaches an MBA course in personal finance at the Schulich School of Business at York University in Toronto.