Overlap between Real Estate and Estate Planning (other than the word “Estate”)

Anyone involved in real estate needs to be aware of estate planning issues that will likely apply to their real estate ownership and transactions. As you can see from the following list, there is a lot of crossover between estate planning and real estate, along with tax issues, and asset protection, among others. We have written about most of these topics in other blog articles, so check out our blog archives if more details are needed.

1. Ownership in joint tenancy/survivorship rights – This is possibly the most common form of estate planning (other than no planning), but this may not match your estate planning intentions and goals, and it may cause problems. Is the survivor really the person you want to have complete ownership after death?

2. Tenants in common – Title held as a tenant in common might make it easier to complete a like-kind exchange, charitable trust or any sort of joint estate planning.

3. Adding children on to title – This is another popular method of passing assets to children, but may also result in a disconnect with planning intentions and goals, and usually results in gift tax problems, opening up your real estate to your children’s creditors and predators, and complicating subsequent transfers. Maybe a “life estate” deed accomplishes the same estate planning purposes without the unintended consequences.

4. Homestead in Florida, tax benefits and creditor protection – Homestead property in Florida has special benefits and requirements, but re-titling of assets out of individual names may result in the loss of homestead tax exemption, and even the Save Our Homes (property tax) protection, as well as weakening the creditor protection that might be available for homestead.

5. Asset protection – Proper entity planning and asset ownership planning may be needed to protect your assets from inside creditors (property and business related) and outside creditors (from other business or personal activities).

6. Appreciated property and capital gain planning – Like kind exchanges and various trusts can be used to delay or defer capital gains taxes on appreciated property, but death might shelter it completely through a property step up in the basis of the property.

7. IRAs and real estate – Did you know that it is possible, within certain guidelines, to hold title to real estate in your IRA? This may or may not be an appropriate diversification and tax strategy for your investments, and it requires a cooperative custodian to hold actual title.

8. Medicaid – Many clients are considering the costs of long term care and realizing that with some advance planning, they might qualify for Medicaid benefits to pay for it. In some jurisdictions, homestead real property can be an exempt asset for Medicaid qualification purposes, BUT, these standards and regulations change periodically.

9. Bankruptcy – Despite popular belief, for new residents in particular, it may no longer be as advantageous to put all your assets into Florida homestead with the intention to shield the homestead from creditors. Other strategies might need to be considered as well.

If any of these items raise questions or cause concerns as to the relationship between real estate and estate planning, please consult with competent legal counsel that can understand and advise about both of those areas of legal practice.

Berlin Patten Ebling, PLLC

Article Authored by Christopher Caswell, Esq. ccaswell@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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