Ask a Lawyer – I have two children, and in my Last Will and Testament, I would like to leave one of them my home and one of them my cottage. They are both about the same value. Will this be fair?
Answer – Under current Canadian law, in most instances, your primary residence will transfer from your estate tax free while your cottage will be taxable. A cottage, or any other second piece of real estate will be subject to a capital gains tax. The tax amount would be calculated on fifty percent (50%) of the gain in value of the cottage. This is the difference between the market value at the time of your death, and the value at the time you obtained the cottage (subject to a few adjustments for certain improvements). If your intention is to treat the children equally, before making such a bequest, make sure that your estate will have other assets available to pay these capital gains taxes. It is a good idea to clearly indicate in your Last Will and Testament that it is your intention that the cottage is to be transferred with all taxes paid from your estate through other assets. If you don’t believe such funds will be available, you may want to make other arrangements for the distribution of the value in your home and cottage – if your intention is to treat your children equally.