Real estate can be expensive. Aside from the property’s worth, owners could face additional expenses related to managing and giving them to family members.
Failing to make an estate plan leads to uncertainty about what happens to your assets after your death. Fortunately, you do not have to wait until then. While you can, you could create a legal document with instructions on what happens to your assets after you die.
By preparing ahead, you could save on costs and set firm directions about your estate. If you want to transfer your real estate in the most cost-efficient ways, consider the following methods:
- Qualified Personal Residence Trust (QPRT): This type of trust has reduced taxes on property transfer. It also allows you to put their property in a trust without losing the right to live in it. These rights will then have an assigned value typically used to calculate the gift tax. When the property’s value increases in the trust, the beneficiaries could receive the increase without additional transfer taxes. If the property owner dies before the QPRT term ends, the interest amount will add to the estate.
- Gifting with lease: Gifting a property to a trust with leaseback is a more straightforward method with similar benefits. After putting the property into a trust owned by the intended beneficiaries, you can pay rent to cover carrying expenses.
- Donating to charity: Donations to charitable organizations or donor-advised funds have similar tax benefits. However, there are limited options since not all organizations accept real estate. Doing so also lets you support their preferred causes.
Despite having advantages, these methods could present unique challenges based on the situation. Getting legal counsel is ideal when trying these strategies.
Owning real estate can be pricey
Property owners face varying costs depending on the real estate and its details. Sometimes, beneficiaries struggle to keep up with these expenses after receiving them. However, asking the right questions and reliable estate planning could address these issues.
These methods could provide a sustainable solution for passing on assets and covering accompanying expenses, giving you and your family security in the future.