Q: I’m interested in keeping my home within the family. What are some things to consider?
A: Start by speaking with your closest loved ones about your family history, values and plans. Some clear questions will need to be asked and answered:
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- First and foremost, are your heirs interested in owning and operating your family home?
- Are they willing and able to cover routine expenses for the property’s upkeep?
- Who will be responsible for coordinating service providers like plumbers, electricians or lawn care?
- Who will pay insurances and taxes?
- Who will check on the place periodically?
Consider these available strategies:
Direct transfer
A direct transfer is one of the most common ways to bequeath property since it allows ownership to be transferred for generations by deed. Within direct transfers, there are various options so be sure to work with an experienced professional on what may work best for you. While direct transfers are relatively easy and inexpensive, they do not offer protection from creditor claims or messy legal situations like divorces. It can also be difficult to resolve conflicts or transfer ownership.
Incorporate
To incorporate, depending on your state’s laws, you can name your home as a limited liability company (LLC). You keep at least 51% and designate your children as shareholders of the rest. Be sure to create an operating agreement which sets procedures to transfer ownership and guidelines for property use, while also planning to include enough money to maintain the property. Your operating agreement should have an “out” so your heirs have the option should they need to sell the house or buy out another owner. Be sure to indicate who needs to agree to a sale and what will be done with the proceeds. Incorporation offers flexibility, reduction of your taxable estate and protection for family members, however, it can be costly to establish and maintain an LLC.
Trust
Trust agreements outline terms of use and how the property will be transferred, held and managed. Trusts are popular as they allow some degree of control and can be less expensive to draft and implement than other options. However, certain trusts can lack flexibility should circumstances change. Many options exist so consult an experienced financial advisor or estate attorney.
There’s no one-size-fits-all solution – ultimately, your plan should facilitate a smooth transfer of ownership, detail shared responsibilities, establish liability protection and document a process for conflict resolution.