Strategies for keeping your beloved home within the family

ESTATE & GIVING

Preserving your property across generations takes thoughtful planning and open communication.

Watching your daughter take her first steps in the nursery. The porch where you saw your little ones 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. And if you decide you’d like to keep it within the family for generations to come, you’ll need to teach your loved ones how to thoughtfully preserve, invest and share their inherited wealth and property.

Communicate with loved ones

Start by speaking with your closest loved ones about your family history, values and plans. These transparent discussions can help frame your collective vision and prepare the next generation to further your family’s financial and philanthropic goals. It’ll also help set the stage for making decisions together on practical matters – such as caregiving needs or succession plans for the family business.

Familial decision-making will also be necessary when you feel the time is right to bring up your cherished property. Some clear questions will need to be asked and answered:

• First and foremost, are your heirs interested in owning and operating your family home?

• Are they willing and able to cover routine expenses for the property’s upkeep?

• Who will be responsible for coordinating service providers like plumbers, electricians or lawn care?

• Who will pay insurances and taxes?

• Who will check on the place periodically?

Consider available strategies

Once you and your family members reach a mutual understanding, speak to your advisor about different planning strategies for transferring your property’s ownership.

Direct transfer

A direct transfer is one of the most common ways to bequeath property, since 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.

Note that while direct transfers are relatively easy and inexpensive, they do not offer protection from creditor claims or messy legal 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, certain trusts can lack flexibility should circumstances change. For example, irrevocable trusts usually cannot be amended. Many options exist (i.e., revocable and irrevocable trusts, irrevocable grantor trusts and qualified personal residence trusts, to name a few), so consult an experienced financial advisor or estate attorney.

There’s no one-size-fits-all solution for passing on your family home – you’ll need to consider each heir’s own family structure, geographic distance and willingness to take on responsibility. Ultimately, your plan should facilitate a smooth transfer of ownership, detail shared responsibilities, establish liability protection and document a process for conflict resolution.

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.