Ask yourself this: do the kids actually want the cottage?

Many parents hope that the cottage can stay in the family for future generations; but, while all the children may enjoy the cottage, that doesn’t mean that all are equally suited for shared cottage ownership. So, which ones to include? Getting it right will result in the cottage remaining a source of joy for future generations. The wrong call can lead to conflict that may eventually split the family. You can make this difficult assessment—which of your children to include in your cottage succession strategy—by planning ahead.

If you don’t want to leave this important aspect of your cottage succession plan to blind luck or overly optimistic assumptions, consider how each child fits into the plan. (More on that in “5 Questions to Ask Your Children,” below.) If you are the kids of parents who own a cottage, talk to Mom and Dad, even if it’s a difficult conversation to start. Once parents and children have determined which of the kids are suitable and interested in sharing cottage ownership in the future, the planning can begin.

Here’s your first step

Before you make the final decision to pass the cottage on to your children, or decide to which of them it should go, ask the kids to tackle the problem themselves by sorting out how they would share it. This process becomes a magnifying glass to show (or not show) that the kids have a collective vision of the place and how it’s used. Shared ownership resolves many problems—especially the problem of affordability—but it can create others. (They may be adults, but they’re still siblings, right?) This is exactly why you need a formal cottage-sharing agreement, created while everyone is still friendly. (More on creating formal sharing agreements next week!)

If one would-be co-owner is saying, ‘It’s my way or the highway, and I want to go whenever I wish and take whomever I wish,’ then it’s clear—you’ve got a time bomb. But if the prospective co-owners can do the work and come back with a plan that shows they can manage it for the next generation, then, okay, sell or give it to the kids.

To start, potential co-owners need to ask some significant questions, including (but not limited to!):

• Can all owners use the cottage all the time?
• If there are periods of exclusive use, how are they allocated?
• During their turn, can owners bring guests, or even rent or lend out the cottage?
• Who will open and close the cottage each year?
• Who makes sure the utility bills, municipal taxes, and insurance premiums are paid on time?
• How are collective decisions for changes, improvements, or additions made?
• And perhaps trickiest of all:

How will cost sharing work?

Cost-sharing usually causes the most discord. Should ongoing costs be split equally, or shared in proportion to usage? If, for instance, the septic system packs it in, one owner may be able to pay his share of the repair bill out of his petty cash, while another may be too strapped to contribute. So, does the cottage go unused for a while or must the strapped owner take out a loan? Or do the better-off partners pay for everything? A cottage agreement could set up a discretionary reserve fund for unexpected expenses, as part of the shared cottage budget.

Incorporating a discretionary reserve fund into the shared cottage budget could help alleviate these uncertainties, ensuring ongoing costs are managed fairly and the cottage remains a source of enjoyment for all owners.

Family Matters is written by Penny Caldwell, with files from Jackie Davis and lawyer Peter Lillico.