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How do you address investment real estate in your estate plan?

On Behalf of | Mar 16, 2022 | Estate Planning |

Maybe you bought small parcels of vacant property outside of town anytime you received an end-of-year bonus from your employer. You might have many small parcels that represent a long-term investment in the land. Perhaps you have purchased multi-unit property or distressed single-family homes to generate some sweat equity in them and become a landlord.

Real estate can be valuable, and passing it to another person can be a complex process. When you own multiple pieces of real estate beyond just your primary residence, your property will impact your estate planning options.

How should you address those investment properties in your estate plan?

Leave them to specific beneficiaries

If you have six parcels of undeveloped land and the same number of grandchildren, leaving one property to each of your grandchildren could be a great way to pass that investment on to the next generation. If you have adult children, you might leave one rental property to each of them.

Especially if there is a reason for specific family members to have an attachment to a specific parcel, this approach can be a good solution for those with a large real estate portfolio.

Leave the properties to your beneficiaries as a group

If you have three children and two rental properties, you don’t want one child to feel slighted because of your estate planning decisions. You could leave the properties to your beneficiaries as a group. Either through a trust or through direct ownership, they could all reap the benefits of the properties you purchase.

Instructions to sell the property

Perhaps you purchased unimproved land because you wanted to make money off of the appreciation of the property’s value. Having your executor sell your investment property and split the proceeds among your beneficiaries can be a good solution when there isn’t any emotional attachment to the properties or a means to generate ongoing revenue.

How you handle the properties will differ depending on the other assets in your estate and the overall value of the property you intend to transfer. Unless you planned carefully, transferring real estate will usually require probate proceedings and could trigger estate taxes if the combined value of the properties is high enough.

Creating an estate plan that addresses your unique assets will help you leave a meaningful legacy for the people you love.