A vacation property owner has always intended to hand down the property to her two children. However, she’s planning her estate and faces a challenge. Her adult daughter regularly vacations at the lakeside property, but her son lives three provinces away and is no longer interested in the property. The equal split no longer works.
Family farms and businesses are other common examples of indivisible assets. One child may plan to take over the enterprise, while another child has pursued a different career path. If you plan to give one child an indivisible asset, you need to financially compensate the other child or children.
Solving the issue
You can give the other child cash or other assets of equal value, but this large outlay may be unavailable. In some cases, the beneficiary of the indivisible asset may be willing and able to buy out the sibling’s share. Or, if need be, you can sell the indivisible asset. Another solution, that you can do now, is to purchase a permanent life insurance policy on your life and name as beneficiary the child who will not be receiving the indivisible asset. This option helps equalize the inheritances with an amount that is guaranteed, tax-free, and received when needed.
Communication is key
The last thing a parent wants is for an indivisible asset to end up causing discord among their children. That’s why it’s so important to discuss your plans up front. This way, if any issues become apparent, you’ll be able to manage them now.