Estate Planning

A major component to every good estate plan is designating what will happen to your real estate holdings. Of course, you could sell and downsize sooner rather than later leaving your heirs more cash instead of house to distribute. You could deed over your real estate now and mitigate any disagreements within family – but, in that event, where would you live?

According to AARP, it is becoming more and more popular to age in place. If your home is suitable for this, you too may be considering this option. But what if your home isn’t suitable? For example, you may find the multiple levels of your home more dangerous and challenging as you age. Perhaps your bedrooms and bathrooms are too small. Maybe your house is just too large now and maintaining it long-term is going to be expensive and tough. Any changes you may be considering to your home is best done when you have the time and patience to work out the details – or this may give you time to find a home that truly best matches your needs and wants as you age.

If you’re primary planning it to leave your home to your heirs instead of selling, you may want to ask yourself why? Do any of them plan on living in the home? Will one person manage it as a rental? What is your expectation with the home after you pass it on to them? The most common answer is that they’ll sell it and distribute the proceeds – in which case, be sure you discuss this point specifically with a financial planner or estate attorney as they may have strategies to mitigate tax liability and other risks.

You may want to explore selling your home while you’re healthy and able and place the proceeds in a trust towards health and long-term care expenses. Doing this, may lower your net worth and improve your eligibility for aid programs such as Medicaid. This may help subsidize your health insurance and long-term care while not removing your access to funds which may be necessary down the road – this is called Medicaid planning and has become quite popular as insurance rules fluctuate and change leaving many people unable to afford insurance and long-term care.

Bottom line, this is an area that requires early conversations and careful planning. For many, their home represents their single largest asset and a cornerstone to a good quality of life. This is not a subject to procrastinate with. Speaking with Kate Gruber may help you understand local value trends and growth expectations – information a financial planner may need in exploring all your options.

Why planning is so important.

• Real estate is a complex asset with ongoing costs and maintenance required; it’s important that the people caring for this asset manage this aspect while the family decides on what they are going to do with the home.
• Homes are often tied up emotionally and this may adversely impact family relationships.
• Homes are not very liquid. The person (or people) inheriting the property may incur legal fees, taxes, and other costs due upon transfer whereas the home itself may not sell for quite some time.
• Outstanding debt. If there is still a mortgage on the home any liquid assets in the estate would need to be used to pay off the mortgage – this may be unplanned and unexpected and adversely impact the distribution of the remaining estate.

Proper planning helps clear up any confusions or misunderstandings and ensures you understand who is getting what, when, and how.