Ensuring Your Real Estate Bequests are a Gift, Not a Burden

Lynn Gifford Bria, Esq.
Principal Wealth Advisor and Senior Fiduciary Officer
Washington Trust Wealth Management

Whether it's a family home, vacation property, farm or condominium, real estate can be a wonderful way to build and transfer wealth across generations. However, without careful planning, your real estate bequests could become more of a burden than a gift for your beneficiaries. 

If you are hoping to preserve real estate for future generations, consider an estate plan that:

1. Establishes an appropriate ownership structure;
2. Provides long-term funding for care and maintenance of the property; and 
3. Establishes clear guidance to foster family harmony.

Establishing the Appropriate Ownership Structure

A direct transfer by gift or bequest will not necessarily preserve access for multiple family members since it gives an individual or individuals deeded interests and vested control.

A trust can provide protection from creditors, funds for ongoing maintenance and control over management, family access and sale of the property, but irrevocable trusts generally offer minimal flexibility when family changes require ownership transfer or alternative plans for payment of carrying costs.

Limited liability companies (LLCs) or limited partnerships (LPs), either held in trust or owned independently by multiple family members, also provide creditor protection, and may be revised to avoid family conflict, update management guidelines, or create additional flexibility necessary for family harmony.

Funding for Long-Term Expenses

Real estate ownership comes with ongoing expenses, from property taxes and insurance to maintenance and repairs. While you and your family may have a personal and emotional attachment to a property, will leaving that property to your beneficiaries be more than they can handle? 

Set aside a portion of your estate and specifically earmark it for the property's future expenses. By carefully analyzing long-term needs and allocating the necessary capital for investment, you can ensure that the property remains an asset rather than a financial drain. 

Providing Clear Guidance for Family Harmony

Life is unpredictable, and circumstances can change. The last thing you want is to create a financial or emotional strain on your family members that causes family discord and misery. Incorporating provisions in your estate plan that create clear guidance for the ongoing management and ultimate sale or redistribution of the property can help meet the changing needs and circumstances of your beneficiaries.

Design a plan for effective long-term management with the assistance of your wealth advisor:

• Consider who should use the property and how to address unequal usage by family members. 
• Review long-term projected operating costs and capital needs and consider that reserves may not be sufficient for generational retention of the property.
• Be sure that your estate plan establishes an ownership structure that is consistent with your goals for management of the property and consider appointing a trustee that can make objective choices that align with everyone’s best interests. 
• Implement a regular review process for your estate plan to ensure that it remains relevant and reflects any changes in your beneficiaries' circumstances or assets available for long-term real estate retention.  

And while you’re addressing long-term expenses and flexibility, make sure to speak to your wealth advisor about how your real estate bequest fits into your overall estate plan, including avoiding common pitfalls of estate planning, addressing any special needs of your beneficiaries, and how to choose a fiduciary or corporate trustee. 

Washington Trust Can Help

When it comes to estate planning, our qualified wealth advisors act as quarterback of your team, making sure all the right players are on the field and working for you. We can facilitate family meetings, review and update estate plan documents, and walk you through the process step by step to ensure your wishes are carried out according to your intentions, giving peace of mind and protection for you and your loved ones.