WORDS FOR THE WISE

1. DON'T DELAY
The sooner you start on your cottage planning process, the more likely your success will be. Some plans should be implemented right away to maximize the benefits, while others take time to mature. If you delay, you may miss your opportunity for the former, or be too late for the latter.

2. GET GOOD HELP
You and your goals are the critical component of the planning, but don't try to do it all by yourself. Accountants are necessary to provide certainty to the tax consequences, while lawyers to create safe and effective structures for succession. Other experts who can contribute are appraisers, insurance brokers and financial planners. Get professional help to ensure optimum results for your family.

3. LEAVE A LEGACY
If you ignore cottage planning, then you leave a potentially nasty can of worms for your loved ones to untangle. This can waste time and money, and most importantly squander family goodwill. Leave a legacy of love and take the necessary steps to sort out your own cottage succession path.

COTTAGE SHARING AGREEMENTS

• Passing the torch
• Protecting the parents
• Providing for children
• Preserving the cottage

While the parents are alive and involved, they usually provide the leadership and guidance for the family. If there are competing wishes for usage periods or different ideas for improvements, the parents will normally make the final decision. From habit and respect, the children generally go along. Cottage life proceeds peacefully.

When the parents are no longer involved, then differences of opinion may escalate to disputes and result in deadlocks. If all kids are equal owners, then no one can outvote the other. A disgruntled child may decide to sell his or her interest to a third party to be rid of the problem, or even force the sale through court action.

A Cottage Sharing Agreement negotiated and implemented while the parents are active can make all the difference between a short and unhappy period of sibling ownership, and a stable and continuing structure for future generations to enjoy the cottage.

The Cottage Sharing Agreement fulfils two important purposes:

1 It is a transition vehicle, safely passing the cottage ownership and control from one generation to the next, retaining the rights and pleasures of the parents while ensuring that the children will be the stewards for the next generation.

2 It is a structure for the children when the parents are no longer involved in the cottage, ensuring that the financial responsibilities, sharing usage issues, division of labour and a fair, mutually agreeable method of dispute resolution is in place to steer clear of the inevitable rough waters.

SHARE THE JOY

Usage:
Free-for-all or taking turns?
Exclusive period allocation?
To rent, or not to rent?

A pleasure of the family cottage is that it perpetuates and nurtures family relationships. It is a focal point for family interaction and enjoyment. But with shared usage comes the need to address some significant questions, such as:

• Can all children use the cottage all the time, or will there be periods of exclusive usage for each child?
• If there are exclusive periods, how or by whom are those periods allocated?
• Can children bring friends as guests, or will it be family members only?
• Can a child rent the cottage during his or her turn, if he or she cannot use the cottage personally?

The Cottage Sharing Agreement process brings such topics to light, permits discussion among the family members, and formalizes the terms that all agree can be accommodated and accepted as a natural consequence of shared usage and overlapping interests.

SHARE THE LOAD

• Cottage obligations
• Division of labour
• Sharing expenses
• Equally
• In proportion to usage
• As affordable

Maybe your children always agree on everything, but many families risk running into serious difficulties among themselves sooner or later. Some of the issues will be mundane, others will be major. All these considerations have the potential to create friction:

• Who will open and close the cottage?
• Who is responsible for making sure the utility bills, municipal taxes and insurance premiums are paid on time?
• Should the ongoing costs of the cottage be shared in proportion to usage or adjusted for affordability, or simply split evenly?
• How are collective decisions made for changes, improvements or additions?

The Cottage Sharing Agreement process will sort out the tasks, fairly distribute the burdens, ease constructive decision making and reduce possible resentments.

SHARE THE COSTS

• Owner contributions
• Discretionary reserve
• Expenditure priorities
• Routine
• Mandatory
• Elective
• Personal

Children are not all the same, and children's pockets are not all equally deep. This reality can lead to real problems. For example, if the septic system packs it in there's no choice but to repair or replace it. The cost may be many thousands of dollars. A brother may be able to pay his share out of petty cash, while his sister may be too strapped to contribute. An uncomfortable dynamic arises: o Does the cottage go unused until the struggling one saves up enough money? o Does the strapped one have to take out a loan to contribute? o Does the better off sibling pay for both?

Any of these approaches can lead to dissension, resentment, guilt and hard feelings. Again, the Cottage Sharing Agreement provides a structure to deal with these issues in a fair, predictable and business-like way, preserving family harmony.

A discretionary reserve built into the ongoing cottage budget can relieve the strain when an unexpected expense hits home.