Leaving Property to Multiple Heirs? What to Consider

Family members hold hands around the dinner table and say a prayer.

(Image credit: Getty Images)

Arguably one of the most difficult aspects of estate planning is choosing who will be receiving your inheritance once you’re gone. If you have any additional property, like a vacation home, its essential that this gets added to your overall plan. It’s a big decision to make that can become even more difficult depending on your family dynamics.

Any mishaps or misunderstandings can lead to a costly battle in probate, which could be disastrous enough to break families apart. But with a clear understanding of your options and adequate planning, you can ensure your vacation home is handled according to your wishes.

When it comes to passing down property, you have a few different options. You can sell it, gift it to your children, establish a trust or form some sort of legal entity like an LLC. If you choose to establish a trust, the trustee(s) you name will be responsible for owning and maintaining the property. If you form an LLC, your heirs will be owners and must follow specific governance rules and operating agreements for how the property is used. But to understand what option is best, you need to understand your family dynamics.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just ~~$107.88~~ $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

If you have multiple children, you’ll want to gauge their level of interest and involvement with the vacation home. One way to approach this is by holding a family meeting and asking everyone to write down their goals and plans for the home. Be sure to discuss the obligations, responsibilities and financial elements of maintaining the home. It’s important that everyone has a clear understanding of what’s going on.

Joint tenancy vs trust agreements

If it’s decided that you want to keep the home in your family for your children to enjoy, there are two important distinctions you’ll want to be aware of: joint tenancy vs. trust agreements.

A joint tenancy is a legal arrangement where two or more people own a property together. In this arrangement, each person owns the property equally. That means any decisions regarding the home must be agreed on by each and every owner. For example, the home can’t be sold unless all of your children agree.

Similarly, each owner is responsible for liabilities associated with the home. This can become a real headache as your children’s lives evolve and can be a real headache if they don’t get along.

A trust agreement is a bit more flexible and gives you control to manage your property even after you’re gone. Doing this essentially allows you to transfer ownership to the trust itself. That means everyone must follow the terms of that document, which can help mitigate disputes and legal battles. It can also protect your property from creditors and lawsuits.

For example, if someone tries to sue you or your children, or attempts to collect a debt, they cannot go after the home because technically neither you nor your children own the home — the trust does.

There’s a lot to consider when dealing with real estate in an estate plan, and the decisions you make have legal implications. To help alleviate the stress, talk to your family and explore all the options available to you. It’s also wise to consult with an estate attorney who can help you take all the necessary legal steps to ensure your estate is handled according to your wishes.

Pat Simasko is an investment advisory representative of and provides advisory services through CoreCap Advisors, LLC. Simasko Law is a separate entity and not affiliated with CoreCap Advisors. The information provided here is not tax, investment or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

TOPICS

Patrick M. Simasko is an elder law attorney and financial adviser at Simasko Law and Simasko Financial, specializing in elder law and wealth preservation. He’s also an Elder Law Professor at Michigan State University School of Law. His self-effacing character, style and ability have garnered him prominence and recognition throughout the metro Detroit area as well as the entire state.