With Canada’s aging Baby Boomer demographic, the transfer of over $1 trillion in generational wealth is well underway. This transfer includes investments, primary homes, and cottages.
Research conducted by Leger for REMAX Canada indicates that 17% of current cottage owners say their children don’t want to inherit it. That means that the other 83% are preparing to have their children and grandchildren take over ownership.
If you currently own a cottage, are thinking about estate planning, or are about to inherit a family cottage, you may be wondering about the best strategies for you and your finances.
Read the 2025 Cottage Trends report here
Succession Planning and the Family Cottage
Solid succession planning is becoming more common for Boomers, but also for their children as they think about what their own children will inherit. The question of how to deal with the family cottage is a big part of that succession planning.
“When it comes to succession planning, cottages are always a solid addition to any real estate portfolio,” says Christopher Alexander, President of REMAX Canada. “Given the long-term return on investment they typically deliver, a cottage is an excellent opportunity for inheritance planning.”
According to a Leger survey for REMAX Canada’s 2023 Cottage Trends Report, 42% of current cottage owners were hanging on to their properties specifically to pass them down to family. The updated 2025 survey indicates that only 17% of current cottage owners are planning to sell, meaning that owning and passing on a family cottage remains popular across the country. Some statistics backing this up are:
- 56% of Canadian cottage owners plan to or have already put their property in their beneficiary’s name.
- 74% of family cottage owners feel confident that they’ll be able to pass their property down through the family
- 48% say working with a real estate agent has helped them think about succession planning.
If the family cottage is going to be passed down to you, preparing in advance is recommended. You’ll have plenty of questions, including:
- Whether to sell the property or hang onto it.
- How to manage joint ownership of the family cottage.
- Is buying out the cottage from the other beneficiaries a good idea?
- The tax implications of inheriting a secondary property.
- Whether to sell your home and live at the family cottage or keep the cottage as a secondary home.
Some of these questions will depend on market conditions at the time you take ownership of the cottage, but thinking about your needs and goals and discussing them with your family is never a bad strategy.
Capital Gains Tax and the Family Cottage
When a person dies, the fair market value of their property at the time of their death is used to calculate taxes. These are the implications for capital gains taxes for cottages:
- The deceased’s estate owes capital gains tax based on the increase in value of the family cottage from the time they bought it to the date they died. Note that this only applies if the cottage was a secondary residence, not their primary home.
- The beneficiary only pays capital gains tax when they sell the property. The tax is based on the difference between the fair market value when you inherited the property and what you sold it for. Again, this does not apply if you move into the family cottage and treat it as your primary home.
- If you inherit joint ownership of the family cottage, you would both pay capital gains tax when you sell the property, as above. If one of the beneficiaries buys the other one out, the seller pays capital gains tax on the difference between the fair market value of the property when the original owner died and whatever they received from the person who is buying out the family cottage.
Here’s an example of how this might work:
- A family cottage was purchased in 1980 for $100,000.
- When the owners pass away, the fair market value for the cottage is $600,000
- The estate pays capital gains tax on the increase in value ($500,000 @ 50%, or $250,000).
- The cottage itself passes to the beneficiaries as stated in the will. The beneficiaries pay no capital gains tax.
- The cottage is sold six months later for $620,000. At that time, the new owners pay capital gains tax on the $20,000 increase in the property’s value ($20,000 @ 50%, or $10,000).
- If one of the beneficiaries is buying out the family cottage, the seller pays capital gains tax on the difference between half the fair market value at the time the original owner died and whatever the other beneficiary paid them. For example, if the fair market value was $600,000, and the selling beneficiary gets $310,000, they pay capital gains tax on the $10,000 ($10,000 @ 50%, or $5,000).
If you’ll be inheriting an entire estate, including a family cottage, keep in mind that the capital gains tax payable by the estate will reduce the overall value of the estate. If there aren’t enough additional proceeds to pay this tax, the estate may need to sell the cottage to cover it. Consulting with an estate planner in advance can help reduce confusion.
The Current Cottage Market
If you’ve inherited a family cottage and you’re planning to sell it, you may be interested in current cottage prices and where they’re heading. Here are some key markets to use as an indication:
British Columbia
Prices are expected to rise about 1.1% in 2025. The market in BC is balanced with healthy demand and adequate supply. Whistler is still the priciest region in BC, with average cottage prices hovering around $1.9 million at the start of 2025. Ucluelet is another highly desirable location for vacationers, cottagers, and year-round residents. It’s becoming a hotspot for remote workers, meaning that prices will likely continue to increase steadily.
Alberta
The market for a family cottage in Alberta is looking stronger than much of the country, with prices expected to rise 3.3% in 2025. Popular areas like Banff and Canmore are driving demand with their close proximity to Calgary and their limited inventories.
Ontario
Ontario’s cottage market is on pause currently. About half the popular family cottage regions have seen price drops anywhere from 1% to 20%, while other areas have seen increases.
Muskoka is leaning toward a buyer’s market, with the average price for a family cottage expected to drop 4.5% by the end of 2025. In the Kawartha Lakes, the market is more balanced, but prices are still expected to increase about 3% in 2025. Grand Bend has seen significant price drops from last year of up to 20.3%. Some areas to the north, including Sudbury, Manitoulin Island, and French River, have experienced increases of up to 13% from last year, and prices are expected to continue to rise.
Overall, Ontario is a mixed bag, with large variations across regions.
H3 Atlantic Canada
The East Coast is expected to see the biggest increases in family cottage prices at about 8% over 2025. Emerging areas like New Brunswick, Prince Edward Island, and Newfoundland and Labrador are seeing family cottage properties selling quickly.
How to Handle a Family Cottage Inheritance
Dealing with an estate can be complex, and a family cottage, with all of its attached memories, can make it even more challenging. Advance succession planning helps resolve confusion and makes the process smoother. Discuss all the options with your family if you’re deciding how to distribute your estate.
Note: Tax rates can vary significantly based on your personal income tax filing levels and the province you live in, as well as the province where the family cottage is located. Tax information given here is current as of 2025.
