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Planning to Leave Real Estate to Heirs? Be Sure to Tell Them Ahead of Time. – Barron’s

Aging parents may think it’s a great idea to leave the family home to their three adult children. But a lot of headaches could be avoided if they talked to them about it first.

Sharing information about plans to leave property to an heir can help with the transition, says Marcy Keckler of Ameriprise.

Photo Illustration by Staff; Courtesy of Ameriprise

A whopping 68% of people say they plan to leave real estate—such as a home, vacation property, or land—to their heirs, according to an Ameriprise Financial study released Wednesday. Yet more than half—56%—haven’t shared these intentions. 

There are, of course, many reasons people tend to clam up about real estate holdings. Survey participants cited fears over heirs not being able to afford the upkeep and taxes, the possibility of family conflicts, and concern that heirs will sell the property quickly. Still, it’s important to share information for seamless transition purposes, says Marcy Keckler, senior vice president of financial advice strategy at Ameriprise. .

“It’s a gift to the next generation to not just give the real estate, but also give heirs tools for a smooth transfer,” Keckler says. 

Advisors should broach the topic with clients to ensure they are addressing this important issue, which can have tax, estate planning, and practical implications, Keckler says. While many advisors focus more heavily on clients’ investment portfolio, real estate holdings are another important aspect of legacy planning that shouldn’t be overlooked, she says.

Sixty-one percent of respondents with real estate said they plan to transfer their holdings after they die, whereas only 15% said they plan to transfer it before they die. Twelve percent said they plan to do a combination, according to the study. The Ameriprise study was conducted in January and February among 3,325 American adults between the ages of 30 and 70 who have $100,000 or more in investible assets.

Seamless transitions. To help make a real estate transfer go smoothly, property owners should be sure to have a detailed plan, include a lawyer in the process, and communicate details about the property and the plan in advance, Keckler says.

Clients should be encouraged to provide heirs with details on taxes, maintenance, and important contacts—all things they need to know when property is passed on to them, Keckler says. Advisors can also help advise clients about the tax implications of gifting real estate during their lifetime. This can be especially important for investment properties. There’s an estimated $6.4 trillion in net worth that people over age 55 have tied up in investment properties, according to estimates from Realized, a platform that provides real estate wealth solutions.

Advisors should also discuss with clients what a potential transfer would look like, how it will be structured, and bring in tax, legal and real estate professionals as necessary, Keckler says.

Advisors can talk to clients about practical issues that can come up if heirs aren’t in the know. Necessary maintenance like lawn care or snow removal can easily be overlooked, Keckler says. 

There can also be familial rifts if property is left to more than one heir and the details aren’t ironed out ahead of time. Keckler suggests that planning for a maintenance fund to help with upkeep might be one way to help reduce tensions.

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