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Use Permanent Life Insurance to Keep Your Recreational Property in Your Family


Your recreational or second property can have significant emotional value to you and your family as a source of many fond memories. From a legal perspective, however, the government considers this property as simply a capital asset. Upon your death, your ownership of the property can be transferred to your spouse on a tax-deferred basis.

If you have no surviving spouse or did not designate your spouse as your beneficiary, for tax purposes you are deemed to have disposed of your capital assets as if you had sold them at fair market value, and the government will expect to collect the taxes owing. The result? Your family may be left with no choice but to sell the property to pay the taxes.

A solution to consider

If you do have a beneficiary spouse, the taxes owing could increase if the value of the property appreciated while your spouse owned it; the taxes would become payable on the death of your spouse. By purchasing a permanent life insurance policy and choosing the “joint-last-to-die” option (with the proceeds payable upon the death of both insureds), you can help your executor pay the taxes owing and keep your second property in the family.

The minimum amount of coverage to consider should at least be equal to the anticipated taxes that would be payable at death. In addition, some families have chosen to purchase an enhanced level of coverage to provide their loved ones with the needed cash flow to cover future expenses or property taxes.

When the second insured dies, the life insurance proceeds will provide a tax-free death benefit that can be used to help pay for the taxes that are owed, allowing the property to remain with your loved ones to enjoy for years to come.

Benefits at a glance

  • A permanent life insurance policy can provide peace of mind for your family members, as the money needed to pay the taxes that are owed upon your death will be available — and they will not need to sell your family’s property to pay the taxes.
  • This solution allows you to pass on your property from one generation to the next, worry-free.

Don’t let concerns regarding your health—or your spouse’s health—stop you from applying for joint-last-to-die insurance, as a person doesn’t need to be in perfect health to be insurable. Premiums for a joint-last-to-die insurance policy can be significantly lower than a comparable policy that’s based on just one individual’s life.

Permanent life insurance in action

Let’s say you’ve had a summer home in your family for many years that has been enjoyed by many generations. Imagine, for example, that this summer home’s value when you inherited it in 1980 was $60,000 and that, today, the home’s estimated value is $360,000.

The projected capital gain on the property in this instance would be $300,000, which means approximately $75,0001 would be payable in taxes owing on the property if you were to pass away today. That might be too big a financial burden for your children if your estate lacked the necessary liquidity.

And picture this: if your spouse dies further in the future, and the value of the property at that time has increased to $600,000, the taxes owing on the property would be $135,000 2 (see chart below). That’s a hefty tax obligation to meet.


Investing in a permanent life insurance policy can help cover the future tax bill and ensure your summer home can remain in your family after you die. Talk to your MD Advisor to get started.

Learn more about MD's insurance offering or contact your MD Advisor  to find out how we can help.

For illustrative purposes only.  The actual tax rates will vary according to your province of residence and your overall income level.