When the Family Cottage Is the Most Valuable Asset
People just don’t realize how emotional real estate is until they have to make the decision of what to do with it , especially heirs acquiring shared ownership after their parents’ death.
When the family cottage is the most valuable asset, a lack of planning almost always results in the cottage having to be sold. The problem is that among heirs there is usually one who either immediately or at some point later decides they would rather have the money than a share of the cottage. It’s been my experience this usually happens even when the parents are convinced that it would be unthinkable that any of their children would ever force a sale of the family cottage based on the emotional attachment and lifetime of experiences at the cottage.
In some families, the parent’s vacation property is their most valuable asset. This can cause a major conflict among the heirs.
Even when only one heir wants to sell and a majority don’t want the sale, a sale can be forced through court action. In some situations the heirs who want to keep the cottage can tap other inherited assets to buy out a sibling wanting out of ownership, but this won’t work where the cottage is far and away the most valuable asset.
The sad thing is that even in situations where the cottage’s value represents a majority of the parents estate, some practical planning before the parents’ death may provide options where at least those heirs that want to keep the cottage can make that happen. Planning provisions allowing restricting the sale terms to occur over time or valuation discounts to discourage a sale may be enough to provide options among heirs.
The main point is that parents who have a family cottage need to be aware of the potential consequences of leaving the family cottage to their children and just “hoping” things will work out.
