Written by Ron Cooke, President & Founder of Strategic Wealth Protection Partners in Ontario, CEA®, Member of the Estate Planning Council Canada
Walter and Barbara* came to me over ten years ago to discuss how they could preserve the family cottage for their children.
They had spent decades creating memories there and wanted future generations to enjoy it just as much as they had. At the time, both of their adult children, Bill and Julie*, spent as much time at the cottage as possible and shared their parents’ love for the property.
Summary of Key Points
- Challenge: An Ontario couple wanted to preserve a cherished family cottage for their children without forcing its sale to pay future capital gains tax.
- Strategy: Permanent life insurance was used to provide tax-efficient funds for the future tax liability, and a trust was established through their wills to hold the cottage for the next generation.
- Outcome: The life insurance performed exactly as intended and provided the liquidity needed to pay the tax bill.
- Unexpected Consequence: Years later, changing family circumstances made the trust restrictive, creating disagreements over ownership, costs, and the future of the cottage.
- Key Lesson: Effective estate planning should account for both future tax obligations and the possibility that family relationships, locations, and priorities may change over time.
The Problem
The cottage had appreciated significantly in value, and Walter and Barbara were concerned about the capital gains tax that would be triggered when they passed away.
Their goal was to ensure the cottage could remain in the family without their children being forced to sell it to pay the tax bill.
At the same time, their lawyer drafted wills that directed the cottage to be held in a trust for the benefit of Bill and Julie. When the estate plan was created, nobody anticipated how much their family’s circumstances would change over the next decade.
The Living Estate Plan
I recommended a permanent life insurance strategy to provide the funds needed to pay the future tax liability on the cottage. The insurance successfully solved the tax problem and ensured the estate would have liquidity when it was needed.
The overall plan included:
- Permanent life insurance to cover the projected capital gains tax on the cottage.
- Estate planning designed to help preserve the cottage for the next generation.
- A trust established through their wills to hold the cottage for Bill and Julie.
The Challenge
The challenge arose years later.
Bill was transferred to Calgary and could only use the cottage occasionally. Julie remained nearby in Ontario and continued to use it regularly. Walter passed away from complications related to Parkinson’s disease, and Barbara passed away two years later following several years of dementia. That’s when the trust became active.
Because of how the trust was structured, the children had limited flexibility.
They could not easily sell the cottage, divide the proceeds, or restructure ownership.
Yet both remained responsible for ongoing expenses. What had once been a shared family dream gradually became a source of disagreement and frustration.
Meanwhile, the life insurance performed exactly as intended and paid the tax liability.
What to Learn from This Situation
This case demonstrates why estate planning must go beyond solving today’s problems.
When evaluating strategies, it is important to consider not only tax outcomes but also how family circumstances may change over time. Sometimes the greatest risk is not the tax bill—it’s the unintended consequences of a plan that no longer fits the family’s future needs.
*Names and identifying details have been changed to protect the privacy of SWPP’s clients.
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Read More
If you’re starting your estate planning process, you may find these articles helpful:
- Case Study: How Bill Protected His Children’s Inheritance with a Trust
- Case Study: How Trying to “Save on Taxes” Put Gabriela’s $2M Cottage at Risk
- How to Avoid Capital Gains on a Cottage in Ontario
About the Author
RON COOKE, PRESIDENT & FOUNDER OF STRATEGIC WEALTH PROTECTION PARTNERS
With over 30 years in financial services, I’ve seen the challenges families face when a loved one passes—lost assets, unnecessary taxes, and emotional stress. That’s why I created the Living Estate Plan, a comprehensive process to protect assets, eliminate estate and probate fees, and create legacies that are remembered for many years to come.
This plan ensures your family receives not just your wealth, but a meaningful reminder of your care and love. Tools like The Final Word Journal capture your story, wishes, and essential details, offering clarity and comfort during difficult times.
Your final gift should be more than money—it should be peace of mind, cherished memories, and an organized estate.
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