Three kids. One cottage. One of those kids lives in Vancouver, or Texas, or somewhere a four-hour drive to Muskoka is never happening. So you leave all three an equal share, because that's fair. Right? That's the move that quietly tears families apart. The far-away one wants to cash out, the other two can't afford to buy them out, and the cottage hits the market. Here's the cleaner way, and it's the kind of file I actually solve.
When one child realistically won't use the cottage, giving everyone an equal share is a recipe for a forced sale. The fix is equalization: give the cottage to the kids who'll use it, and give the out-of-province child something of similar value instead. A reverse mortgage on the family home can fund that gift with tax-free cash, no required monthly payment, and no need to liquidate investments. Best part: you can do it while you're alive to see it work.
Usual disclaimer first. I'm a mortgage agent, not a lawyer, accountant, or financial planner. A real equalization plan needs that whole team. What I bring is the financing piece, the part that answers "where does the money come from," and it's the piece most families never think to ask about.
Why "Equal" and "Fair" Aren't the Same Thing
Parents want to treat their kids equally. Of course they do. So the will says the cottage splits three ways and everyone's happy. On paper.
In real life, equal ownership of a shared cottage only works if everyone can actually use it and carry it. The child two time zones away can't. They'll be expected to chip in for the new roof on a place they visit once every three years, if that. Resentment builds. Eventually they ask to be bought out, the siblings can't swing it, and the only way to free up their share is to sell. Equal on paper, a disaster in practice.
Fair looks different. Fair is asking, honestly, who's going to be a real cottage owner. If one child says "I love the place but I can't be an owner," you give the cottage to the two who can, and you give the third an equivalent value some other way. That's equalization. And here's the part that surprises people: ownership and usage aren't the same thing. The far-away child can still be written into the family's sharing agreement for, say, two weeks every summer. They keep the cottage in their life. They just don't carry the ownership headache.
Equal ownership of a cottage nobody can share equally isn't fairness. It's a slow-motion for-sale sign.
The Old Way: Cash Out Investments and Eat the Tax
So you want to hand the out-of-province child their share now, while you're alive. Where's the money come from? The reflex answer is to dip into the RRIF or sell the non-registered portfolio. And that's where it gets expensive.
Pull a big lump from a registered account and it's fully taxable income that year. You can push yourself into a higher bracket, trigger Old Age Security clawback, and watch a chunk of the gift evaporate to tax before it ever reaches your kid. You're also selling good investments on someone else's timeline. For a one-time equalization, that's a lot of damage to do to a retirement plan.
The Cleaner Way: Borrow Against the Home, Not the Portfolio
Here's where I come in. Instead of dismantling investments, you tap the equity sitting in the family home. For homeowners 55 and up, a reverse mortgage is purpose-built for exactly this.
The mechanics are refreshingly simple. You borrow against the home, the funds come to you tax-free, and there's no required monthly payment, the loan is settled later when the home is eventually sold or from the estate. You keep the title. You keep living there. And because a reverse mortgage qualifies on age and home value rather than income, it works for retired parents who'd never qualify for a regular loan or HELOC on income alone. That last point matters more than people realize. A traditional credit line is useless if you can't income-qualify, and plenty of asset-rich, income-light retirees can't.
So the parents draw the tax-free cash, gift the equivalent value to the child who won't use the cottage, and the cottage goes cleanly to the two who will. No investments sold. No surprise tax on the gift. No forced sale. Everyone gets their fair share, and the family gets to watch it happen instead of leaving it to sort out in an estate.
This doesn't have to be done while you're alive. The same equalization can run through your estate using life insurance or a compensating bequest in the will. But doing it now has a quiet upside the brochures skip: you're around to see the family actually settle, and you head off the fight before it can start.
The Honest Trade-Offs
I won't pretend a reverse mortgage is free money. It isn't, and any broker who sells it that way is doing you a disservice. The interest accrues over time rather than being paid monthly, so the balance grows, and that reduces what's left in the estate down the road. For some families that's a perfectly sensible trade. For others it isn't. It depends on the size of the home equity, the value of the cottage, everyone's ages, and what the rest of the estate looks like.
That's the whole reason this is a team sport. Your lawyer drafts the structure, your accountant checks the tax, your planner weighs it against the estate, and I run the financing numbers so you can see the real cost in black and white. I lay out how reverse mortgages work, what they cost, and who they suit in my full guide on keeping the cottage in the family. The goal is never to push a product. It's to keep that cottage in the family without a fire sale, and to make sure every kid feels fairly treated.
One kid who won't use the cottage?
Let's run the numbers on equalizing them without selling the place or cashing out your investments. I'll show you the real cost. Free call, no obligation.
Book a Free Discovery CallFrequently Asked Questions
How do you equalize a child who won't use the cottage?
You give the cottage to the children who'll actually use and carry it, and you give the other child something of equivalent value instead, rather than a share of a property they can't use. That value can come from a reverse mortgage on the home, life insurance, or a compensating bequest in the will. Ownership and usage are separate, so the equalized child can still be written into the family's sharing agreement for a set number of weeks each year. They stay connected without carrying ownership.
Can I use a reverse mortgage to give my kids money while I'm alive?
Yes, and it's a common reason people use one. A reverse mortgage lets homeowners 55 and up draw tax-free cash from their home's equity with no required monthly payment. Parents often use it to fund a gift to a child now, including equalizing a child who won't share in a cottage. You keep the title and keep living in the home. The loan is repaid later, usually when the home is sold or from the estate. Run it past your advisors first to weigh the cost.
Why not just cash out investments to equalize the kids?
You can, but it's often the costly route. A large withdrawal from a RRIF is fully taxable income that year and can push you into a higher bracket and trigger Old Age Security clawback, so part of the gift is lost to tax. Selling non-registered investments can trigger capital gains and forces you to sell on someone else's timeline. Borrowing against the home keeps the proceeds tax-free and leaves your portfolio intact. Compare both with your accountant before deciding.
What's the catch with a reverse mortgage for this?
The interest accrues instead of being paid monthly, so the loan balance grows over time and reduces what's left in the estate. For families with strong home equity and a clear goal of keeping the cottage, that can be a sensible trade. For others it isn't the right fit. It depends on ages, home and cottage values, and the rest of the estate. That's why a reverse mortgage for equalization should be decided alongside your lawyer, accountant, and a broker, not on its own.