It's important to note that when "giving away" an item such as your cabin or cottage to your children, despite your purest intentions, it can quickly become an enormous tax burden for the recipient/s.
Here are some different options to discuss with your children, a lawyer and a tax specialist to determine the best solution for you and your family.
You can "gift" your cabin to your children now. This option will still trigger immediate taxable gain based on fair market value, but any additional capital gains can be held off until the children dispose of the property on their own terms. For this transfer, owners will need to secure a "life interest" clause in order to have the rights to be able to use it and to protect it from being sold while they are still living- that is, if they still want to use it and/or live in it.
You can also "sell" your cabin to your children now. This way you can free up capital for other pursuits and although capital gains still have to be paid, your children will avoid the probate costs. Also, it can be sold incrementally which will help break up the annual capital gains, and make the purchase more financially accessible.
The "simple bequest" is a standard option whereby when the owner passes, the property is left to the children in a will. This is a good option when there are minimal or no capital gains taxes to be incurred.
You can make your children "joint tenants". In such as case you and your children share an equal ownership of the property, and the property is considered to have one owner: parents and children collectively. The property can be passed directly to the joint tenants without paying probate fees, but capital gains are still triggered.
You might consider transferring your cottage to a "living trust". This is an option available to persons over the age of 65. In such a case you would no longer own the cottage, but you'd still have control over it and benefit from it. At the time the trust is created, there are no capital gains payments or probate fees. The trust will provide shelter from capital gains for up to 21 years.
In the case where the property in question is on the larger side and to be passed down to many family members, there is the option of establishing the cottage as a "non-profit organization". In this case, members pay dues for access to the property. Also successive generations can use the property without paying capital gains tax or probate fees. Capital gains will likely be triggered in the initial transfer- but these can be filtered into the "member fees". There are also ongoing accounting fees to consider as an accumulative expense.
