If you own multiple properties or large real estate holdings, estate planning is a must to ensure your assets are protected and handled according to your wishes. Whether you’re worried about what will happen to your properties if you’re incapacitated or after you pass, it’s crucial to have a plan that covers all bases. An article in The Tax Adviser outlines the following eight key factors to keep in mind when planning for your real estate.
1. Retaining Control of Properties While Protecting Your Estate
Many property owners in Jefferson County want to keep control over their assets, even as they plan for the future. However, if you retain too much control, some or all of your real estate could end up being included in your taxable estate when you pass away. This could create unexpected costs for your heirs. Be careful not to hold onto rights that could trigger tax issues later.
Tip: Work with an experienced attorney to structure your estate plan so you maintain control while minimizing tax exposure.
2. Valuing Your Real Estate Properties Accurately
The value of your real estate is a critical part of estate planning. Often, property values can be discounted because of factors like marketability or shared ownership, which can reduce the taxable value of the estate. This can save you money on taxes, but it’s important to use the right method to determine these discounts.
Tip: Accurate and formal appraisals of your real estate can help protect your assets and reduce taxes. A Jefferson County real estate attorney can help you with this step.
3. Planning for Liquidity
Real estate is not a liquid asset, which means it can’t be easily turned into cash. This can become an issue if your estate owes taxes or other expenses after your death. Without enough cash on hand, your heirs might have to sell properties quickly, potentially at a loss, to cover these costs.
Tip: Consider setting up provisions like estate loans or payment plans to ensure liquidity when it’s needed.
4. Taking Advantage of a “Step-Up” in Property Value
When real estate is passed on after death, its value is often “stepped up” to the current market value, which can save your Jefferson County heirs a lot of money in capital gains taxes if they decide to sell. However, this benefit only applies to certain assets, so it’s important to structure your estate plan to make the most of it.
Tip: Make sure your plan is set up to allow for a step-up in property value where possible, especially for highly appreciated real estate.
5. Picking the Right Person to Serve as Executor of Your Estate
Choosing the right person to serve as the executor of your estate or trustee of your trust is crucial. If your estate owns real estate, the person you select should have experience managing properties or be willing to hire professionals who do. This will ensure your real estate is properly maintained and that any tax benefits related to your real estate holdings are preserved. Read more in our article, Managing Inherited Real Estate
Tip: Choose an executor or trustee with experience in real estate management or legal expertise in real estate. Real Estate Attorney Amber Fitzgerald works closely with her Jefferson County clients to help them explore executor or trustee options, including third party options, based on their personal circumstances.
6. Plan Carefully for Multi-Generational Estate Planning
If you want your real estate to stay in the family for generations, you need to plan carefully. Taxes on wealth transfers across multiple generations, such as the generation-skipping tax, can be costly. Fortunately, there are exemptions and strategies you can use to help minimize these taxes and keep the properties in your family.
Tip: Work with an estate planning attorney to protect your properties from generation-skipping taxes and make sure your wishes are followed across generations.
7. Gifting Property During Your Lifetime
If you’re planning to gift property to family members while you’re alive, there are specific rules to follow that can affect how much the gift is worth for tax purposes. If you have properties that may increase in value, transferring them now can be a smart move, but you’ll need a solid plan to make sure the value of the gift is properly calculated.
Tip: Discuss gifting strategies with a Jefferson County real estate attorney to minimize potential tax issues and maximize the benefit to your family.
8. Regular Estate Plan Reviews
An estate plan is not something you can set and forget. Real estate values fluctuate, and your life circumstances may change. Regular reviews will ensure that your estate plan reflects your current wishes and that your properties are handled the way you intend.
Tip: Schedule regular reviews of your estate plan with your attorney, especially if you acquire or sell properties or experience significant life changes.
Speak with a Jefferson County Real Estate Attorney to Protect Your Properties
If you want to ensure your real estate holdings are managed properly, both during your lifetime and after, it’s essential to have a solid estate plan in place. The Fitzgerald Firm can help guide you through the complexities of estate planning for large real estate portfolios. Speak with a trusted real estate attorney today and book a call with us at The Fitzgerald Firm. Protect your properties and your legacy!