When it comes to estate planning, transferring property is a crucial aspect that requires careful consideration. For many, properties including your home, vacation homes, and even income properties, are a large part of your wealth. With baby boomers currently passing down over $53 trillion to their heirs in one of the largest generational wealth transfers ever, how those properties are being passed on has become a large conversation. To secure your legacy, it’s important to take a look at the best ways to transfer your property that make the process as easy and economical as possible for the next generation.
The Best Ways to Transfer Property
Use a Trust to Avoid Probate
One of the most effective ways to transfer property seamlessly is by setting up a trust. Trusts help you avoid the often lengthy and costly probate process, ensuring that your family members receive their inheritance without unnecessary delays. This approach can be particularly advantageous for properties, as it provides a straightforward method for transferring real estate assets to your beneficiaries.
Opt for a Step-Up in Basis
A key consideration when transferring property is minimizing tax implications for your heirs. Utilize the step-up in basis benefit, which adjusts the value of inherited assets to their current fair market value, reducing potential capital gains taxes for your beneficiaries. This strategy can save your family members substantial amounts in taxes when they eventually sell the property. For instance, if a property bought for $50,000 is now worth $600,000 when inherited, the capital gains tax is calculated on the difference between the sale price and the stepped-up basis of $600,000.
Consider Gifting Property
Gifting property to your heirs while you’re still alive can be a family-friendly approach. It not only allows you to witness your loved ones enjoying their inheritance but also reduces the size of your estate, potentially lowering estate taxes. However, be mindful of the gift tax limits and exemptions to ensure your generosity remains economical for both you and your beneficiaries. Always consult with an estate planning attorney in your area to ensure this is a good option for your goals.
Explore Life Estates
If you’re attached to your property and want to maintain control during your lifetime, a life estate might be the solution. With a life estate, you retain the right to live in the property until your passing, at which point ownership transfers to your heirs. This approach provides peace of mind that you can continue living in your cherished home while avoiding posthumous legal complexities for your family.
Your estate plan should help to transfer your property seamlessly for your loved ones and also help achieve your goals when it comes to preserving and passing on your wealth. It’s always best to seek guidance from an estate planning attorney in your area before making any major changes to your plan. If you are in Illinois or Wisconsin, we can help you create or update your estate plan to reach all your goals.
Disclaimer: This article is intended to serve as a general summary of the issues outlined therein. While this article may include general guidance, it is not intended as, nor is a substitute for, qualified legal advice. Your review or receipt of this article by Lexern Law Offices, Ltd. (the “LLG”) or any of its attorneys does not create an attorney-client relationship between you and the LLG. The opinions expressed in this article are those of the authors of the article and does not reflect the opinion of the LLG.