Portfolio Growth and Generational Wealth Creation

[Brian Cain]

Hello BP friends. I would appreciate an expert's opinion about a fortunate situation I'm in. I'm starting my own family-owned real estate investment company. To summarize, I want my entire family to be a part of this endeavor where we purchase and hold the property for the long term creating generational wealth. Here is the situation. As an investor myself, I've always loved the business of real estate. Due to their advancing age, my parents will be leaving all their property to us, the children. My parents will leave 3 residential homes and 2 commercial buildings. Over the next few years, I hope to leverage this opportunity to grow the portfolio. They're alive and well now, but they want me to manage the properties and expand the family portfolio. Since I am not trying to start a property management business, I would probably outsource that section to someone else. I'm mainly interested in finding new properties and land to invest and hold. My future focus would be on purely commercial properties, such as apartments, mobile homes, commercial warehouses, etc. I am sure I left out some additional information, so I would appreciate an expert's opinion on how to proceed. Happy Holidays BP peeps!

[Henry Clark]

@Brian Cain

Please read my post about what happens if you "Die".

1.  Put off the Generational Wealth idea, until you have other things covered.  Make this about them first, not future generations.

2.  Most of your parent's wealth will be used up in medical bills and retirement homes.  Let's say $6,000 per month.  Do you have a medical policy in place, a retirement home fund in place?

3.  Do you have a "Trust" in place?  Not a "will".  All of the properties and their assets need to be re-assigned to the trust.  If you don't do this, there will be a lawsuit and your relatives won't be your friend anymore.

4.  Do you have their funeral expense policy covered?  Headstone?

5.  Wealth transfer.  Before Death, after death.  Put together a game plan. 

"Before Death" 

a.  Residential homes- 2 of 5 years primary residence.  Talk with an accountant.  Sell the house they are living in, this gain won't be taxable.  Take these funds and take care of the above items.

 b. Have them move into the next house, live there 2 years and then sale.  

 c. Again, with the third house.  Avoid taxes, before their Death.,

d. Excess funds move into the "Trust".  Work with a "Trust" attorney and not a "regular" attorney.  See if this can be setup so the government can't attack this for their retirement home costs.  Check on time limits.  Most of this needs to occur up to 5 years before they go into a home, or the government can come back and take it. You don't want to be in the middle of an REI deal and have to sale.

e.  Set the Trust to use up or expel all funds within "xx" years.  Don't have it keep going forever.

"After Death"  

a.  "Stepped up basis"., 

b.  No inheritance tax if assets are below?  Find out figure, plus it may change.

6.  Now let's talk "Generational Wealth".

 a.  Have a multiple meeting discussion with your parents and your siblings., 

b. The greatest investment you can make is to have all of the children or grandchildren get an education. This will far exceed any REI investment you do. Set aside funding that will "run out" with the grandkids, set "x" amount per child during their lifetime until they are 25 years old; or transfer over in the Trust.

c. Now REI investments. Looked at your Background, but no REI investments are listed. Recommend you don't tie your desires to the potential benefits of the entire family. If you and your parents decide to do that, then recommend you take care of all of the above first, then what is left over, use to that end.

The two Commercial Buildings- need more info.