Should you put your cottage in a trust?

When it comes time to consider the fate of your cottage — whether to sell, maintain, or even place it in a trust — it can be overwhelming. Instead of putting it off, here are some questions that you can answer to get started on this important part of your estate planning.

Tackle the following questions:

• Which children are interested in owning the cottage?
• What’s the impact of passing the cottage to only one child?
• Are my children, their spouses, or their children capable of jointly owning the cottage?
• Do any children have the financial resources to purchase it from their siblings?
• Does it make sense to pass on ownership prior to death?
• Are there other estate assets that can match the value of the cottage with other children?
• Will I need to sell the cottage to maintain my current lifestyle?

One option is using a trust to hold the family cottage. There are several possible advantages:

• It allows continued access to the cottage throughout your life, while letting you pass on the increase in value, as well as the related tax liability, to future generations.
• The trust agreement can address the ongoing management of the property and responsibility for costs. As part of the trust, you may also choose to include a sum of money for the upkeep of the cottage.
• You could feel your children are not yet able to handle the financial responsibilities, or have concerns about existing or potential creditors, or marital breakdowns.
• Decision making can be simplified by having the trustee make the decisions as to use, upkeep and eventual disposal.
• Probate fees will be avoided on death because the cottage will be owned by the trust and not you.

Dean DiSpalatro is the senior editor of Advisor Group.