What to Know About Estate Planning for Real Estate Owners
No one likes to think about death, and definitely not talk about it. And because of that, many people don’t talk about it, and then when it unexpectedly happens, their family is burdened with what to do with their estate. Don’t let that be you. We’re here to offer tips on estate planning for real estate owners (thanks to Emily Sullivan with Heritage Law Estate Planning and Mediation).
The best thing to do is create an Estate Plan. This is a custom, legally-binding set of documents that lays out your desires for what happens with your property and assets after your death. Specifically regarding real estate owners, this helps loved ones to know what happens with your property tax or any debt you may have and most importantly, your actual property or properties.
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Trusts are tools that offer control over your assets and how they are distributed after your passing. For real estate owners, this can also provide legal protection for the trustees. (Definition: an individual person or member of a board given control or powers of administration of property in trust with a legal obligation to administer it solely for the purposes specified)
Pretty much anything can be put in a Trust for safekeeping, but if we’re specifically talking about real estate, it would mean the property you own would transfer ownership to the Trust. This is what will keep it safe for your beneficiaries after your death.
The other positive of putting your estate in a Trust is that it allows your beneficiary to avoid probate. We’ll get to this in a minute.
Taxes and Trusts
If you’re placing real estate in a Trust, your beneficiaries will receive a tax deduction, which will only make them responsible for paying income tax on the taxable amount of the Trust.
Federal Estate taxes are due nine months after your death. This shows that you’ll want to make sure that whomever you set up as your beneficiary will have the financial means to cover these expenses.
Probate is a legal procedure that a person’s estate goes through when they die. Only assets “stuck” in a person’s estate/name go through probate. Assets that have a beneficiary designated avoid probate. As mentioned before, assets that are in a Trust also avoid probate.
The above reason alone is big enough for you to make taking care of your assets, prior to your death, a priority. Probate is a huge headache for all involved. It will require hiring an attorney, putting creditors on notice and doing an inventory and accounting of your assets. It is an archaic process that can take up to a year to administer – which means your family won’t see the distribution of your assets until the long, expensive process is complete.
Have we convinced you why estate planning for real estate owners (and anyone!) is so important? It’s a process that will cost you a couple meetings and at most a few thousand dollars, yet will save your loved ones many headaches, confusing meetings and stressful situations all while they’re in the process of mourning your death.
This is just a short explanation of estate planning, mainly focused on the real estate side of things. It covers so much more like power of attorney, living wills (or medical directives), guardians for minor children and more. As a real estate team, we know how important this topic is, and we’re here to help guide our clients to the right resources when you’re ready to take this step.
Will and Trust specifics can change from state to state, but if you’re in the Kansas City area, please be sure to check out Heritage Law Estate Planning and Mediation. We highly recommend!