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The Intersection of Real Estate and Estate Planning
Jan 14, 2021

Real estate encompasses not only your primary residence but also other real estate you own such as vacation homes or rental properties.  The ideal form of ownership varies depending on the type of real estate you own.  Below, we take a look at the different types of real estate and offer some guidance on the best form of ownership for each.



Primary Residence

Because a primary residence can receive special tax treatment, it would be wise to carefully consider how your primary residence is owned.  In many states, tenancy by the entirety offers married couples creditor protection from the creditors of one of the spouses (with a possible exception for federal tax liens) while still preserving relevant tax benefits.  This form of ownership also allows automatic transfer of ownership to the surviving spouse upon the death of the first spouse without court involvement.  Transferring ownership of the primary residence to separate spousal revocable trusts or a joint revocable trust may also be an option if you live in a jurisdiction that allows the tenancy by the entirety protection to transfer to the separate revocable trusts or a joint revocable trust.  Ownership by a trust also means that the real estate will not go through the lengthy, expensive, and public probate process but will instead be handled according to the grantor’s wishes as specified in the trust document. 

If you are single, owning property in your name allows you to take advantage of tax benefits for primary residences.  Transferring ownership to a revocable trust may also allow you to retain the applicable tax benefits with the added benefit of avoiding the probate process.  If asset protection is a major concern during your lifetime, certain types of irrevocable trusts are best suited for your needs but may require you to give up some control of your property.

The bankruptcy code may provide additional protections for a primary residence (e.g., your state may have a homestead exemption).  However, in some states, transferring your primary residence to a trust may eliminate the homestead exemption because the trust, rather than you, will be deemed to be the owner of the residence.  If this situation could apply to you, it is important that you meet with a knowledgeable estate planning attorney before transferring your primary residence to a trust. 


Vacation Home

For some families, their vacation home has not only high monetary value but also significant emotional value.  Ownership of a vacation home by a trust or limited liability company (LLC) can be advantageous because it addresses two main priorities: ease of transfer to the next generation and asset protection. 

With a trust or LLC, you are able to establish rules for how the vacation home is to be used and maintained, as well as designate what is to happen to the property once you pass away.  This can be a great solution if you want to ensure that the vacation home stays in the family for generations with minimal family conflicts.

An additional benefit of having an LLC own your vacation home is that it provides limited liability from outside claims.  If a judgment is entered against the LLC, the creditor is limited to the accounts or property owned by the LLC to satisfy the creditor’s claims and cannot look to your personal accounts or property or those of the other members.  On the other hand, if a judgment is entered against you or another member for a claim unrelated to the LLC, it will be harder for a creditor to force a sale of the vacation home.  This can be incredibly helpful if you wish to pass the vacation home on to the next generation without worrying about the individual financial situation of each new member.  Note that, in some states, a single-member LLC (an LLC in which you are the only member) does not enjoy the same protection from your personal creditors.  The rationale of these laws is that your creditors should be able to seek relief through your LLC interests to satisfy their claims because there are no other members that will be negatively impacted by seizure of money and property owned by the LLC.

If the vacation home has been in the family for many years, it is important to consult with an estate planning attorney and your tax advisor to make sure that transferring your vacation home to a trust or LLC will not cause an increase in your property taxes or any other unintended consequences. 


Rental Property

Because rental property is an income stream rather than a residence, asset protection is usually the primary concern.  As a landlord and owner of rental property, you face a higher probability of lawsuits arising in connection with the property because the occupants can change over time.  Transferring ownership of the rental property to an LLC is a great option. If a renter gets injured on the property, sues the LLC that owns the property, and obtains a judgment that exceeds any property insurance you have, the renter can seek satisfaction of any claims only from the accounts and property owned by the LLC, not from your personal accounts and property or those of any other owners of the LLC. 

In addition, ownership by the LLC may protect the rental property from your personal creditors.  However, if you are forming a single-member LLC, it is important to check state law to be sure that creditor protection is available.


Whether you are concerned about your primary residence, vacation home, or rental property, we are here to assist you in protecting your property.  Given the various considerations for selecting a form of ownership, it is important to have the right advisors helping you along the way.  Give us a call to discuss your current and future real estate ventures and the best way to protect them for your loved ones.

Estate Planning: An Overview

15 Feb, 2023
Estate planning entails preparing your affairs for the future, including death and other life events. While older adults might give more thought to estate planning, it is an essential tool at any age. WHY IT’S IMPORTANT With estate planning, individuals and families can protect their interests during incapacity or after death. You can provide for a spouse, children, and dependent family members when you pass away. You can arrange your care and financial affairs should you suffer a severe accident or illness that renders you incapacitated. If you are a parent, you can appoint a guardian to care for and manage the inheritance of your minor children. If you own a business, you can prepare to transfer it to family members, colleagues, or other trusted individuals. You can make arrangements for your long-term care when you can no longer live on your own. You can also make funeral preparations, determine what happens to your body when you pass, and prepay for your funeral, all of which can help lessen the burden on your family members. WHAT IS AN ESTATE? Legacy planning entails passing on your estate. Your estate is everything you own, including: Savings and checking accounts Retirement accounts Investments Life insurance Annuities Houses and other real estate Cars Personal possessions, such as jewelry, furniture, and sentimental items When you die, your estate encompasses all your property upon death. If you sold or gave away property before death, it is no longer part of your estate, and you cannot transfer it upon death. Items you own with another person are also part of your estate. Depending on the type of asset, it might automatically pass to the other owner. For instance, if you own a home with your spouse as tenants by the entirety, it will pass to your spouse upon your death. WHAT IS AN ESTATE PLAN? An estate plan consists of legal documents and arrangements that determine the distribution of your assets when you die or outline your care if you become incapacitated. While a will can be a central component of an estate plan, a solid plan encompasses more than a will. It can also include legal tools that allow assets to pass outside of a will and probate (the process by which a court oversees the distribution of assets in a will). ESTATE PLANNING TOOLS In addition to your will, your estate plan could include the following: Purchasing jointly owned property or adding a joint owner to your property Designating a beneficiary on a pay-on-death bank account, retirement account, or annuity Buying life insurance to benefit your family should you pass away Creating a trust for a child Obtaining long-term care insurance to cover future nursing home or assisted living fees Executing power of attorney documents, naming health care and financial agents Making a living will, providing instructions for care should you become incapacitated Preparing a transfer on death instrument to pass ownership of your property to a beneficiary upon death WHAT IS AN ESTATE PLANNER? As professionals helping people make future arrangements, estate planners are attorneys who focus on end-of-life preparations. Estate planning attorneys assist people with drafting legal documents and understanding laws and taxes that could affect them and the loved ones they will leave behind. When creating estate plans, individuals may need to consult attorneys as well as other experts, including financial planners, accountants, life insurance advisors, bankers, and real estate brokers. WHAT DOES THE FINAL DISTRIBUTION OF ASSETS INVOLVE? The final distribution of assets is a conclusory step in the probate process before the court closes probate. When an estate goes through probate, the personal representative or executor must satisfy all debts, and the court must resolve all disputes before allowing the beneficiaries to receive the assets. At the end of the probate process, ownership of the assets of the estate is transferred to the beneficiaries. DO I NEED A LAWYER FOR ESTATE PLANNING? Although the law does not require that individuals secure legal representation to make estate plans, many find the support and guidance of estate planning attorneys invaluable. An estate planning attorney can help you identify the legal tools and strategies that suit your needs, as well as draft the necessary documents, such as wills, trusts, and powers of attorney. In addition to addressing tax concerns and drafting documents, these attorneys can help you avoid probate. Probate, the process by which the court oversees the distribution of assets in a will, can be expensive and time-consuming for surviving family members. It also opens the door for disgruntled people to challenge the validity of the testamentary document, further complicating asset distribution. An estate planning attorney could help you organize your assets to transfer outside of probate to make the transfers simpler, easier, and less vulnerable to challenges. When you are ready to create an estate plan, contact Jayde Law PLLC.

Three Things to Know About Being an Executor

01 Feb, 2023
An executor (or personal representative) is a person or entity you choose to carry out your last wishes outlined in your will. Your executor should be someone you trust is responsible enough to manage your estate after you pass away. Choosing an executor is a big decision when it comes to estate planning. So, what should you know about an executor? What should you consider before naming an executor? Here are answers to three common questions about executors. Can an Executor Decide Who Gets What? No. In most circumstances, an executor cannot decide who gets what property. Executors are responsible for carrying out the decedent’s wishes as outlined in the will. However, if the decedent did not distribute all their assets in their will, in some circumstances, the executor may be able to decide how to distribute the unassigned property. Can an Executor of a Will Be a Beneficiary? Yes. An executor can also be a beneficiary of the will. It is common for people to have their surviving spouse or children act as the executor of their estate. This choice can be cost-effective if you have a small or simple estate. Another benefit of having a family member act as the executor of your estate is they are familiar with your wishes. They know you, and they understand how you want your assets divided. If you forget to state where property goes in your will, an executor that knows you well is more likely to give those assets to the correct beneficiaries. How Long Does the Executor Have to Pay the Beneficiaries? The short answer is: It depends. The executor should work diligently to get each beneficiary paid as soon as possible. While the executor is responsible for ensuring beneficiaries receive the money or property they were left in the will, the probate process may delay beneficiaries from receiving a payout. Depending on the size of the estate and the debts and taxes the estate owes, it may take anywhere from six months to more than one year for a beneficiary to receive an inheritance. The probate process varies depending on the state, but the typical process goes like this: Submit the Will for Probate — Part of the executor’s responsibility to the estate is to file the will with the probate court. Filing the will begins the probate process. Once completed, the beneficiaries are one step closer to receiving their inheritance. The time executors have to file a will with the probate court varies by state. File an Inventory — An inventory of estate assets is required. As part of an inventory, the executor determines the total value of all estate property, money, and other assets. A completed inventory can then be used by the executor to determine whether federal or state taxes apply, or whether assets will be used to settle debts. Pay Taxes and Debts — Before the executor can distribute any assets to beneficiaries, estate debts and taxes must be paid. The executor is responsible for ensuring these payments are made. Creating a complete estate plan can be overwhelming. With the help of an experienced estate planning attorney, you can ease some of the anxieties you may be facing in thinking about estate planning. If you are ready to start the estate planning process give Jayde Law PLLC a call..
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