For many people, real estate may be their largest asset. Real estate holdings, whether commercial or residential, tend to be high ticket items with lasting value. Doesn’t is make sense, then, that your real estate will have a big impact on your estate plan. After all, estate planning is one of the most important tasks you can take, a job that will affect you and loved ones for years to come. So, what role does real estate plan in your estate plan? That’s what we’re going to explore in this article.
First, the Basics
Estate plans generally consist of the following documents:
- Your Last Will and Testament (“Will”);
- A Durable Power of Attorney; and
- An Advanced Directive regarding health care.
Revocable living trusts are another common estate planning tool.
Your advanced directive should not be affected by real estate. However, your durable power of attorney may grant someone the authority to handle your real property if you are incapacitated. It’s in your Will and trusts that real estate may take a starring role.
Property Ownership Matters
How your property is titled, or owned, makes a big difference in how it is handled in your estate plan.
- Joint Tenancy with Right of Survivorship. As you and your lawyer put together your estate plan, any kind of joint property ownership is sure to raise questions. The process may be fairly simple because your property interests passes directly to your joint tenant (often a spouse). Make sure your property titles reflect your preferences and that your estate plan takes joint ownership into account also. Coordinate.
- Tenants in Common. Property owned by more than one person is assumed to be a tenants in common situation. Unlike joint tenancy, tenants in common have no right of survivorship. If you own property as tenants in common, you can bequeath your property interest to your heirs.
You can also pass property to heirs through your Will or by transferring ownership to a trust.
Estate Planning Tools Specifically Geared for Real Estate
Some estate planning tools relate directly to real estate:
- Life Estates allow you to pass your property to heirs after you are gone while allowing you to continue living there until the day comes. Property held under a life estate typically does not become part of the owner’s probate estate.
- A Qualified Personal Residence Trust (QPRT) is another option that allows the grantor to continue living at the property while enjoying tax breaks.
- Qualified Terminable Interests Property Trusts (QTIP) provide a way for the grantor to preserve an inheritance for children from previous relationships while providing for a current spouse.
- Revocable Living Trusts (RLT) allows you to transfer control of entities that are owned by the RLT without judicial intervention.
With these and other options, you and your estate planning attorney can work out an estate plan that works.
Account for Your Real Estate in Your Estate Plan
The experienced estate planning attorneys at Virtus Law have what it takes to assist with your legal concerns. Please contact us by calling 612.888.1000 or emailing us at info@virtuslaw.com. Our main office is located in Minneapolis, with other offices located in Maplewood, Cambridge, Edina, Mendota Heights, and Red Wing.