As you make an estate plan, it is very important to address real estate. This could include commercial properties that you own as a business owner, the family home where you raised your children or a vacation property that you own elsewhere in the state.
How you decide to transfer real estate to the next generation can be very complicated. Additionally, real estate is a valuable asset. For both of these reasons, it is important to understand what options you have. Below are three common approaches.
Joint ownership before death
One option is to establish joint ownership with a beneficiary before you pass away. For example, you and an adult child could be joint owners, allowing that child to take over as the sole owner after your death. This option can still affect your estate, however, as it may trigger gift tax issues.
Passing it to multiple beneficiaries
If you have multiple beneficiaries, such as several adult children, they may all expect to inherit the property. For example, multiple people may want to inherit a vacation property and keep it in the family. You can pass the property to multiple beneficiaries, who then become joint owners. The main drawback is that this can sometimes lead to conflicts and disputes over how the property should be used, who pays taxes and who covers maintenance costs.
Selling the real estate
In some cases, the simplest option is to sell the real estate in advance. Once the property is sold, you can place the proceeds into your estate plan. For example, you may divide the funds among beneficiaries or place the money into a trust to be distributed by a trustee.
No matter which option you choose, it is important to understand the legal steps required to handle real estate properly in your estate plan.