Careful planning is required if you wish to keep the family vacation home, hunting lodge, or farm property within its family ownership. Otherwise, your children could end up fighting over it or become the subject of creditor claims against it.
There are various strategies for keeping property within a family forever. Here are some of the more prominent ones:
Gifting
Retaining land within the family can prevent it from being sold or used as collateral during times of financial stress, which is why many families decide to give property or interests therein as gifts during their lives. This can be accomplished in several ways, including annual exclusion gifts or creating entities to hold the real estate (Grantor Retained Interest Trusts or Limited Liability Corporations). No matter which strategy parents select, it is imperative that they communicate their plans to their children to avoid surprises and disappointments later on. Lambert Coffin can assist in planning to achieve your desired goals.
Trusts
Trusts provide an effective means of keeping property within the family while avoiding unnecessary taxes and managing potential issues. By setting up either a revocable or irrevocable trust, you can tailor your estate plan and provide for specific beneficiaries while setting conditions such as age attainment provisions or restricting how money in the trust may be spent.
Your terms should also allow adult children to use but not own your land while alive, which will ensure it remains within the family and provides you with an opportunity to monitor how responsible your adult children are with such assets.
Avoiding costly probate processes may also be possible through trusts and other strategies like joint ownership with rights of survivorship, payable on death accounts and transferring property before your death. Whatever strategy you employ, communication and planning are essential in keeping homes, farms, vacation cabins and prized collections of Boz Scaggs albums in the family.
Joint Tenancy
Joining forces with another person when buying property under joint tenancy with rights of survivorship can help divide up costs and make homeownership more attainable. While most commonly applied to real estate purchases, JTWROS arrangements may also apply to bank accounts or other forms of assets.
One of the chief advantages of this form of ownership is avoiding probate court. Under traditional circumstances, when someone dies their assets must go through probate to be distributed among their beneficiaries; this process can often take years and be expensive. With this type of ownership arrangement however, probate can be avoided altogether and distributed more quickly and cost effectively to beneficiaries.
One drawback of joint ownership is that if a creditor successfully pursues a claim against one party, it can impact all involved. This may present difficulties for couples hoping to leave their joint properties to non-family members after death; however, the last living co-owner can easily create a tenancy in common and give their shares to any heirs they wish.
Wills
Many people assume that passing their property onto their children will ensure it stays within the family, but this may not always be true. Giving property to a child or grandchildren as joint owners nearly guarantees it will eventually be sold off to pay creditors of one of them.
Wills are an essential way of making sure that your wishes about real estate are carried out after you die and reducing gift and estate taxes. There are different types of wills; while simple wills may suffice in certain instances, for maximum protection it is wise to have one prepared by an experienced trusts and estates attorney in order to ensure precise wording that won’t be challenged postmortem by family or business associates, which could result in the court awarding your property to someone other than your intended heirs.
