The best estate plans feature custom terms based on an individual’s unique circumstances. The family members and other beneficiaries receiving property from the estate can influence the best strategies and tools to use. The assets that belong to the testator also play a major role.
Those with good credit scores or liquid capital may acquire real property as a way of generating regular income. Working as a landlord can result in a predictable stream of revenue as well as a portfolio of valuable properties that accumulate equity over the years.
A landlord with multiple real property holdings has to consider how to appropriately transfer those resources to the next generation. The following are some of the strategies that landlords can use when creating or updating an estate plan.
Granting beneficiaries individual properties
Sometimes, a testator’s portfolio seems to mirror their personal circumstances. They may have seven duplexes and seven grandchildren. In such scenarios, it might make sense to include provisions in a will bequeathing one property to each grandchild. Such arrangements can be relatively simple, allowing individuals to address their real property portfolio with just a will in some cases. They can also feel confident that they have given each of their loved ones an opportunity to step into the world of rentals or liquidate the property for nest egg funds.
Moving property to a trust
Landlords with multiple properties often create legal structures to serve as the owners of those properties. Some landlords create limited liability companies (LLCs). Others create trusts. Using a trust to own and maintain rental properties can be a smart strategy. The testator can appoint someone capable of handling the legal and practical considerations of rental management while ensuring that their loved ones receive regular income from those properties. Particularly in scenarios where family members may not have the skills or proximity necessary to manage the properties themselves, establishing a trust could be a viable solution.
Arranging for property liquidation
Individuals may rely on their rental properties for retirement income. After they pass, they may want the wealth invested in those properties to pass to their loved ones. It is a somewhat common practice to leave instructions for the liquidation of business assets after the owner’s passing. Arranging for the sale of rental properties can provide beneficiaries with capital that they can use to enrich their lives as they see fit.
Reviewing a portfolio of investment properties and other personal circumstances with a skilled legal team can help those who have made savvy investment choices address their resources in effective estate plans. Rental properties can provide ongoing income, housing or liquid capital for the beneficiaries of an original owner.