Many Canadians enjoy the tranquility of a cottage. A recent survey from Royal LePage showed that 89 per cent of Canadians believe that a vacation property is a healthy long-term investment. However, an Angus Reid poll of cottage-bound Canadians revealed that 46 per cent were concerned about the taxes.
When an individual dies, assets can be transferred tax-free to her spouse, but when the second spouse dies, his assets are passed on to their children or other heirs, creating a tax bill on the gain.
This tax is paid before the heirs receive anything. An asset like a personal residence is exempt from this type of taxation, but cottages generally won't be exempt and will be considered a capital asset.(How Life Insurance Can Be Used To Offset Taxes On A Cottage continued...)