According to many, the Baby Boomer Generation (those born between 1944 and 1964) has accumulated more wealth than any other generation in history, estimated to be worth between 30 and 68 Trillion, with a T. With the average life expectancy sitting at around 79 years in the US.
Roughly between 2023 and 2043, anywhere from $1,500,000,000,000 to $ 3,400,000,000,000 per year could be transferred to younger generations. That is 1.5 TRILLION to 3.4 TRILLION a year for 20 years. So, the big question: What happens to my real estate when I die? The answer to this is always going to be that depends! Let’s break it down.
A homeowner’s property will typically enter Probate upon their death.
Assuming you don’t have a will or trust and your home is not owned within the structure of an LLC or other entity like a trust – you will enter probate court. Probate is a type of court supervised process in which assets worth more than $20,000 go through to be passed on or receive a final disposition. This sounds like a simple enough answer however this can get to be very costly especially if there are complicated family dynamics. What if you had a child or other loved one living in your house, what if you were married, or divorced, or remarried, or there are other children from other relationships to include grandchildren. You can see where this is going.
We can tell you from experience that family harmony following any estate transition is hardly ever cordial. This is a potential grab at generational wealth in which various family members could benefit greatly. In fact, according to the 2007 book Estate Planning for the Post-Transition Period, “70% of estates lose their assets and family harmony following the transition of the estate.” This is caused by in-fighting, lawsuits, inexperience handling large sums of money or wealth or real estate.
Avoiding Probate and a Possible Family Feud.
To guarantee a seamless transfer of wealth to your loved ones, you should seek out the professional advice of a qualified estate planning attorney in Nevada. They can help craft an appropriate structure that clearly lays out the estate plan for any executor to enforce. This makes everyone’s job easier as you can craft the who what when and where of the transfer of your real estate and often avoid significant taxes, penalties, fees and other costs which will only eat away at any net worth you considered passing on.
It can ensure that things like taxes, homeowners association fees and other bills and maintenance of the property are managed until such time when any heir might be permitted to take possession of the property while avoiding liens in the process. Often larger estates and land can be put into limited liability companies or trusts. This can often alleviate the federal estate tax otherwise known as the death tax.
Heirs are not ready to take on your assets.
Consider that your heirs might not be ready to simply take on a large estate or transfer of wealth. This can be due to any number of reasons. Establishing a solid structure within your estate plan can account for these types of scenarios. Maybe you do not want your grandchildren to have one of your houses until they finish college as an example. Setting up your estate plan can guarantee that your real estate is secure and otherwise liquidated under your terms where the funds can be set aside in trust, or to fund education accounts or handle other family matters.
Selling Your Home
If you elect with your estate planning attorney and family that it is best to liquidate your home upon your death, make sure you clearly instruct the executor of the estate as to the details. Things to consider might be market timing, any possible rental income or other maintenance items that could be addressed before such a sale. If you have a completely paid off property, all the liquidity is locked up in the home and your heirs cannot get any money absent a sale.
Giving additional guidance to the executor can alleviate any accusations of estate fraud whereby another heir could accuse the executor of slowing down the distribution of assets for personal gain. However, the reality is you have instructed them to wait for a certain set of market conditions to sell the home. You also want to make sure the executor is taking the home to a fair and open market and by selecting a firm ahead of time, heirs cannot accuse the executor of using a friend or relative who might be leaning on the market scales for your listing. You may scoff at the idea, but these are things we have heard of before.