3 tips to successfully passing on real estate to heirs

Take proactive steps today to help ensure your legacy is carried out as you wish.
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Whether it’s a primary residence that’s been in the family for generations or a beloved vacation home, passing on real estate to heirs can be an important part of a legacy. However, transferring real estate often comes with many financial and emotional challenges — particularly when multiple heirs are involved.

We are here to help you navigate these complex estate planning conversations with your loved ones. Here are three tips to help you answer your heir’s questions on the property, provide clarity on your estate plan and minimize worries for everyone involved.

Tip #1: Audit important property information

When leaving real estate to heirs, giving a comprehensive and clear understanding of all expenditures associated with the property can help ease any anxiety they have about maintenance. One way to do that is to conduct a property audit to document the following information:

  • Routine operating costs
    • Mortgage (if applicable)
    • Taxes
    • Insurance
    • Utility bills
    • Regular service providers (exterminators, lawn care, etc.)
    • The estimated cost of tasks that you handle now, but your heirs might need to hire out in the future (house cleaning, for example)
  • Upcoming maintenance expenditures, such as replacing HVAC units
  • External circumstances that might affect your heirs’ ownership of the property, particularly its future value

Tip #2: Understand tax ramifications and other financial implications

There are numerous ways to pass along property to heirs, and they all have accompanying tax and financial implications. When you thoroughly explore the available options, you can make an informed decision about whether to:

  • Leave the property in your will
  • Gift the property in your lifetime
  • Place the property in a trust
  • Add the heirs as co-owners on the current deed
  • Sell the property outright to your heirs
  • Pursue an alternative option based on what best serves your situation

Each of these options will have advantages and disadvantages based on your individual circumstances, and they should be considered within the context of your overall estate planning strategy.

Tip #3: Have a proactive and candid conversation

Communicate your wishes to your heirs in advance to ease potential tension, especially if the property will be passed down to more than one person. Prepare yourself for responses that may surprise and even disappoint you.

Your heirs may have reservations about inheriting the property for personal and/or financial reasons. Or they might be excited but have different ideas about how the real estate should be transferred.

When you meet, listen to your heirs’ ideas and concerns, and encourage them to take time to review the plan and discuss it with their own advisors.

Achieve the legacy you want

If you need help creating or communicating a plan to heirs, we’re here. Know that we can help facilitate financial conversations with family or provide recommendations for a tax professional or estate planning lawyer.