Executive Summary
One of the best, least expensive, and least painful methods to ensure your valuable family cabin stays in the family is through the use of life insurance. A last-to-die policy covering a married couple, with both spouses 65 years of age and in good health will have premiums that will easily be less than the tax bill.
Not only is it important for cabin-owners who want to keep the cabin in their family to arrange life insurance when their health is good and premiums are low, but the sooner the life insurance policy is put into place, the more peace of mind you and your family will have.
Key Factors to Know
A cabin that has been in the family for decades can easily generate a tax bill of $200,000 or more upon the second death of the original husband-and-wife owners. Don’t believe that the “if I register my kids on title” or “my lawyer has a way to not pay tax” schemes. CRA has seen and heard it all before, and could tax and penalize you DOUBLE if you get too cute!
A cabin that was purchased in the 70s or 80s that has a cost-basis of $100,000 will likely be worth $500,000 today, generating a $400,000 capital gain, of which 50% of the gain is subject to tax. Since this deemed disposition would appear on the cabin owner’s terminal tax return, along with a full withdrawal of all RRSP funds as required by law, the $200,000 gain would be subject to Federal and Provincial income tax of about 44%. Or about $88,000.
The next generation has a few options; pay the tax out of the estate, obtain a mortgage (if they can, there are no guarantees), or pay the tax associated with the gain with the proceeds of a life insurance policy.
The Bottom Line
Just because you’ve named your kids as the beneficiaries of your family cabin in your will or added your kids’ names to title, doesn’t mean they will inherit the cabin when you pass away without a large tax bill. You should speak with a financial advisor or accountant to help you estimate the possible tax bill on the second death in your relationship.
Often, the large, unexpected tax bill means family members are forced to sell the cabin. However, you can avoid this scenario by ensuring you have proper life insurance in place. Speak to a trusted financial advisor today.

Cabins, Tax and Life Insurance – Make Sure Your Cabin Stays in the Family!