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Keeping It Close to Home for Generations

  • Post category:Savings

Keeping your beloved home within the family takes planning and communication.

Watching your daughter take her first steps in the nursery. The porch where you saw your littles head off to kindergarten. Standing in the kitchen jumping for joy as your son received his first college acceptance letter. Your home is full of delightful, heartwarming memories. You may decide you want to keep your home within the family for generations to come – if so, you’ll need to teach your loved ones how to thoughtfully preserve, invest and share their inherited wealth and property.

Before taking steps to create your family’s estate plan, it is imperative to communicate and discuss details to ensure a smooth transfer.

Communicate with loved ones
Take time to discuss your family history, values and plans. Transparent conversations can help frame your family’s vision and prepare the next generation. These conversations will help your heirs properly oversee wealth to further your family’s financial and philanthropic goals.

Based on your family’s values and group discussion, you can make decisions together and share your vision. Together, you can make a lasting, values-based plan to help your family maintain a living legacy that honors the hard work of those who came before.

Discuss practicalities
When it comes to bequeathing cherished property, you’ll need to come to a mutual understanding with your loved ones. Are your heirs interested in owning and operating your family home? Consider whether your family members have the cash flow to cover additional routine expenses (such as upkeep and landscaping) on top of their own. Even if you decide to outsource the work, you’ll still need someone in charge to coordinate everything, pay insurances and taxes, and check on the place.

Consider your planning options
After reaching a mutual understanding, discuss the following estate-planning methods with your advisor to help effortlessly transfer your home to loved ones:

  • Direct Transfer: A direct transfer is one of the most common ways to bequeath property, as it allows ownership to be transferred for generations by deed. Within direct transfers, there are various options that may work for your family, including joint tenancy with rights of survivorship, tenants in common, life estate, or transfer on death. Do note that while direct transfers are relatively easy and inexpensive, there is no protection from creditor claims or messy 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 that sets procedures to transfer ownership and guidelines for property use, while also planning to include enough money to maintain the property (people often choose life insurance proceeds). 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 like an LLC. However, one caveat is that trusts lack flexibility should circumstances change, since irrevocable trusts usually cannot be amended. There are several options (i.e., revocable and irrevocable trusts, irrevocable grantor trusts and qualified personal residence trusts, to name a few); an experienced financial advisor can help you decide.

There’s no one-size-fits-all solution, so talk to your financial advisor about your family’s plan. Consider each heir’s own family structure, geographic distance, and willingness to take on responsibilities. Use your time now to communicate your values and story, listen, and discuss what your estate plan means for your loved ones. Understanding your family’s goals and expectations for your home and finances will help establish a shared legacy. Your plan should establish a smooth transfer of ownership and detail shared responsibilities, liability protection and a process for conflict resolution specific to your family.

Even after creating your plan, be sure to keep conversations going – with your family, your advisors and the rest of your professional team. Your decisions should be properly documented, but most importantly, you’ll want to make sure your wishes are thoroughly understood.

Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. This material has been created by Raymond James for use by its financial advisors.