How Repurposing Your CPP Retirement Benefit Can Safeguard Your Family Cottage

"My parents acquired our cottage in 1985, and it holds countless memories for our family. I vividly recall a Labour Day weekend during my early university years when I and a horde of friends descended upon the cottage with ample beer but, regrettably, scarce food. Priorities were different in those days. My parents often recall that story.

Over the years, our cottage has been a wellspring of stories, entertainment, and shared experiences. My kids have spent numerous weeks there with my parents, forming close bonds and making cherished memories. Recently, my boys and their girlfriends visited the cottage before heading to university. Witnessing the joy it brought to my parents was truly heartwarming. My father has meticulously documented every visit in journals spanning 38 years. Our cottage has always been my "happy place," and the joy it has brought my parents is immeasurable.

With 38 years passing by, we've seen remarkable appreciation in its value, especially amid the COVID cottage boom. Many families face a common dilemma: how to pass down the family cottage for future generations to enjoy while grappling with a substantial capital gain. How can the next generation afford the capital gains tax without selling the cherished property first?

Illustration for a 65-year-old couple

Let's put this into perspective. If your cottage's value has appreciated by a million dollars, you're staring at a capital gains tax bill of over $250,000! This is where your CPP Retirement Benefit can step in as the hero. By repurposing some or all of your CPP retirement benefit into a Joint life insurance policy, you can cover the capital gain with only a fraction of the benefit, depending on your cottage's appreciation.

Did you know your CPP-funded insurance policy could address a more than $5 million capital gain? Consider this scenario: A family's cottage appreciates by $1 million. A couple in reasonably good health, both 65 years old, choose to take their CPP benefit at 65. They allocate 20% of their CPP benefit into a Joint life insurance policy. The monthly premium, a modest $435, covers the entire capital gains tax on the cottage.

Does this sound like a solution worth exploring for your family's cottage, chalet, or investment property? I'd be delighted to provide a personalized illustration to help you consider the possibilities."