Determining Property Inheritance Doesn’t Have to be Painful

The ski chalet in Aspen. The mansion in the Hamptons. The family compound that’s hosted generations for the holidays.

Although certainly sentimental, these pieces of real estate may not hold the same value to dependents.

In fact, although real property is one of the highest-ticketed items in a Trust, it is notoriously one of the most difficult to settle.

The death of the head of family will trigger change

When a patriarch or matriarch passes, family dynamics change. New leadership emerges and very likely new direction; not all of it may be welcomed.

Taking into account the wishes and needs of the family in advance, and then determining the appropriate solution (like moving it to something income producing), can ward off future problems like having to sell the property to pay estate taxes. Naturally, those decisions are better made before a major life event, like death, occurs.

But, unfortunately, often times that doesn’t happen.

Although people assume they know how to settle their own homes without expert help, we’ve often seen the opposite: debates that turn adversarial may cause lasting damage.

Here’s why…

Motivations vary. There are plenty of factors that influence why a dependent would refuse inheriting real estate.

A son may have relocated from the West to the East Coast with his wife and, due to professional and personal commitments, rarely visits home and doesn’t want the responsibility. A family vacation home in Newport Beach could be of little use if dependents now prefer retreats in Jackson Hole.

Lifestyle changes have an impact too. A daughter may have moved to an emerging country to teach, devoting her life to simplicity and charitable giving.

Of course, whenever real property is inherited, so is the tax burden and ongoing maintenance attached to it and that can be quite expensive in some cases.

Managing multiple beneficiaries can become a nightmare of its own. Siblings gifted real estate together may find they do not wish to be partners.

Avoiding worst-case scenarios

A lack of advance planning can create situations where real estate can’t be divided, inciting family disunity. Or, beneficiaries may be forced to sell a property that they would rather hold.

The goal is always to find solutions consistent with intergenerational long-term family growth, and that’s where the help of professionals comes into play.

It pays to plan

Set expectations at the start. Plan for the worst, but hope for the best.

In order to carry out this advice, it is recommended that beneficiaries be included in initial conversations about who will receive real estate as the Trust is being initially created. Revisiting these plans annually is sound.

Advisors like Whittier Trust grow more valuable the longer they serve families. Moreover, they act as a neutral arbitrator to help deliver the wishes of the family without emotional attachment.

Although planning for the future is intimidating, it is critical to preserving not just property, but family and individual peace.