When it comes to real estate and your estate plan, you may need to put some thought into how you want that real estate to pass. For many families, that could be farmland, a family cottage, the house the kids grew up in or other family properties. Many family members do not want the property sold, instead they want to keep it in the family for generations to come. Just providing that the estate is to be divided equally between all the children may not be enough.
Here are some things that you need to address:
- Will the property have a mortgage and will the heirs be able to assume the mortgage or continue the payments?
- What are the tax consequences associated with owning this property? Will the kids be able to afford the property taxes? Michigan has recently passed new law regarding property that is passing to next of kin that avoids the uncapping and increased property taxes. But this may not be true for property in other states or countries.
- Does everyone want to keep the property in the family? What if one of your three children has no desire to keep the property for generations to come and wants to be bought out? Will there be sufficient other assets to give that child cash in lieu of property?
- What are your family dynamics ? Do all the children and their spouses get along? Are all of the children in similar financial condition? Will owning the property create a financial burden for one but not the other? Will there be problems arranging who uses the property on certain holidays?
As you can see, keeping real estate in the family comes with a lot of questions and issues that need to be discussed openly with the entire family as part of the parents’ estate planning process.