When purchasing real estate, most people focus on the immediate aspects of the transaction: securing financing, finding the right property, and negotiating the sale price.
However, one often overlooked but crucial consideration is estate planning. Integrating real estate into an estate plan helps manage and distribute property according to your clients’ wishes, safeguarding both their assets and loved ones in the long term.
Protecting Property Assets
For many, buying a home is one of the most significant investments they’ll make.
Without proper estate planning, these assets may be vulnerable, potentially leading to complications for heirs or beneficiaries. A well-structured estate plan provides clarity and security for how property will be managed in the event of death or incapacity.
By placing the property in a trust or adjusting the title, probate can be avoided, simplifying the transfer of ownership and reducing the risk of disputes among heirs.
For married couples or co-owners, estate planning can dictate how property rights are transferred upon death, protecting loved ones.
More Asset Protection Planning
While a Deed held in Joint Tenancy will provide for the property to go automatically to the surviving party, a Deed held in Tenancy by the Entirety will allow for the same result but will also allow for asset protection for the parties.
A Tenancy by the Entirety assures that the creditors of one party cannot come after the interest of the other party. If the party with creditors is the second to die, their creditors have valid liens against the property. Even if the parties put their property into a trust, the trusts can hold it in a Tenancy by the Entirety.
Addressing Taxes and Expenses
Estate planning also helps anticipate and prepare for taxes or other expenses related to real estate.
Without a plan, heirs could be left with burdensome taxes, maintenance costs, or mortgage payments that might have been reduced or avoided through proper preparation. Tools like trusts and gifting strategies can minimize estate taxes, leaving more of the property’s value to beneficiaries.
By planning for real estate-related costs, an estate plan helps beneficiaries manage financial obligations without unexpected strain.
Avoiding Legal Disputes
Without a clear plan for property distribution, family disputes can arise, especially when real estate holdings are involved.
Multiple heirs may have differing ideas about how the property should be handled—some may want to sell, while others might want to keep it. And providing for different adult heirs to share the ownership of property so that they will “get along” can cause the exact opposite to happen as one member of the group might wind up with the financial responsibility while others just avoid making a decision. Understanding the personalities and finances of the heirs is critical to effective planning
Estate planning allows for specific instructions regarding the future of your real estate, whether it’s to be sold, passed to certain family members, or held in trust. This clarity helps prevent conflicts and makes sure your clients’ wishes are carried out smoothly.
Planning for Incapacity
Estate planning also addresses the possibility of incapacity.
If your client becomes unable to manage their real estate holdings, their estate plan can designate someone to make decisions on their behalf, allowing their property to be managed according to their preferences.
This includes appointing a durable power of attorney or setting up a trust to handle the property’s maintenance, financial obligations, and any potential sale.
By incorporating real estate into estate plans, your clients can protect their property, reduce tax burdens, and provide peace of mind for their loved ones. Estate planning is a proactive way to manage and distribute real estate according to their long-term goals.
The Minchella & Associates Difference
With over 40 years of experience in Illinois real estate law, Erica Minchella has represented thousands of home sellers and buyers, landlords, and commercial and investment property owners. For more information, schedule a consultation today.
