Most people engage in comprehensive estate planning to ensure that the things they have worked for throughout their life can pass along to their heirs. Preserving your assets is an important part of ensuring that you are able to pass as many assets to heirs as possible. There are a variety of methods that allow you to successfully preserve assets in the face of major life events, if you are being pursued by creditors, or even from the financial costs of probate. It is of particular importance to make sure that high value assets, like real estate, are protected in these situations. Fortunately, there are several steps you can take to make sure that your real estate assets are able to be passed on.
Perhaps one of the most common ways to protect real estate assets is to gift them to a friend or family member. You can either make an outright gift of the real estate or place real estate in a trust for a person. If you make an outright gift of real estate to another, you may be subjecting the transaction to the federal gift tax. However, the gift tax may ultimately be significantly less than the estate tax you could face if real estate you are gifting were to be included in your final estate valuation. An experienced estate planning attorney can help you understand both the federal gift tax and federal estate tax, as well as their state-level counterparts, to help you make more informed decisions about gifting high value and/or other assets.
Another popular way to protect real estate assets is to utilize a trust. There are various types of trusts available, including a Qualified Personal Residence Trust (“QPRT”). A QPRT allows individuals or couples that own real estate to transfer a principal residence or vacation home to an irrevocable trust. One of the benefits of an irrevocable trust is that assets placed within it are out of reach of creditors that may wish to satisfy debts by seizing all or a portion of assets within the trust. This type of trust may help you avoid gift taxes related to the gifting of high value assets like real estate, and assets within trusts re generally not counted in the valuation of your estate for estate tax purposes.
Investment real estate – like property you have purchased and maintain for leasing or other income purposes – or business-related real estate can be protected by transferring ownership of the property to a business structure such as an LLC. You are still able to receive income and other benefits from this property, but by transferring it to a business structure you can help avoid any personal creditors that may try to access the assets depending on how the business structure is structured and operated. An experienced estate planning attorney working with you on your personal estate planning strategy can help you understand the various benefits and pitfalls of this and other potential avenues for protecting and preserving your real estate assets.