Estate Planning for Real Estate Investors

Aaron ZimmermanBusiness Member

Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes

1y

Great information. This is all things my wife and I will focusing on in the next year! I appreciate your insights.

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William ThompsonBusiness Member
OP
Accountant · Williamstown, NJ · Member since 2025 · 329 posts · 178 votes
1y
Quote from @Aaron Zimmerman:

Great information. This is all things my wife and I will focusing on in the next year! I appreciate your insights.

That’s awesome to hear! Taking the time to set it up now will save you and your family a ton of stress later. Glad the insights helped—estate planning is one of those things that feels heavy at first, but once you have it dialed in, it gives real peace of mind. Wishing you and your wife all the best as you put your plan together!
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Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

1y

OP. We have gone the trust route. But since this is a RE forum I would split the discussion between Tax Deferral and Tax avoidance.

Tax deferral- one main tool being 1031, I would use a 1031 specialist. Since your post is based on death. As long as I had power of attorneys and TOD bank accounts, trusts would be preferable but Will would work. Key is ongoing operation of the asset so it doesn’t lose value.

Tax Avoidance- the biggest hitter is the $250k capital gain exemption. Again based on assumption of death. For one spouse not a big deal since death will create stepped up basis. The main problem is most of us don’t just die. You go to a rest home and your required to use up your assets say $6k to $10k per month leaving the remaining spouse destitute. Again thru power of attorney and family structure try to get as many people to qualify on the property with the $250k deduction and sale prior to death.

If you have significant assets beyond the residence. See last section below.

Gifting also is a big hitter but most older people won’t relinquish control.

Since this is a RE forum, I actually don’t worry about my son. If I gave him 1/20th of our wealth, but he chose to learn RE from us he would be worth $100mm or more in 20 years. So he can earn his own money. And probably would appreciate it more.

The only other tact I would take if I had say $5mm or more and the child was young would be an Insurance Annuity product spread over 100 years subject to death. I would work with a financial advisor in that case.

I don’t know the stratum’s of the BP posters wealth. Would guess 90% less than $100,000. Then 5 % less than $1mm. The rest above. Point is Trust versus Will won’t really matter to most in relative dollars. Depending on the stratum you will or won’t care enough to take the steps and pay the cost. Say $10,000 for a knowledgeable estate attorney to set up a trust.

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William ThompsonBusiness Member
OP
Accountant · Williamstown, NJ · Member since 2025 · 329 posts · 178 votes
1y
Quote from @Henry Clark:

OP. We have gone the trust route. But since this is a RE forum I would split the discussion between Tax Deferral and Tax avoidance.
Tax deferral- one main tool being 1031, I would use a 1031 specialist. Since your post is based on death. As long as I had power of attorneys and TOD bank accounts, trusts would be preferable but Will would work. Key is ongoing operation of the asset so it doesn’t lose value.
Tax Avoidance- the biggest hitter is the $250k capital gain exemption. Again based on assumption of death. For one spouse not a big deal since death will create stepped up basis. The main problem is most of us don’t just die. You go to a rest home and your required to use up your assets say $6k to $10k per month leaving the remaining spouse destitute. Again thru power of attorney and family structure try to get as many people to qualify on the property with the $250k deduction and sale prior to death.
If you have significant assets beyond the residence. See last section below.
Gifting also is a big hitter but most older people won’t relinquish control.
Since this is a RE forum, I actually don’t worry about my son. If I gave him 1/20th of our wealth, but he chose to learn RE from us he would be worth $100mm or more in 20 years. So he can earn his own money. And probably would appreciate it more.
The only other tact I would take if I had say $5mm or more and the child was young would be an Insurance Annuity product spread over 100 years subject to death. I would work with a financial advisor in that case.
I don’t know the stratum’s of the BP posters wealth. Would guess 90% less than $100,000. Then 5 % less than $1mm. The rest above. Point is Trust versus Will won’t really matter to most in relative dollars. Depending on the stratum you will or won’t care enough to take the steps and pay the cost. Say $10,000 for a knowledgeable estate attorney to set up a trust.
Really solid breakdown. I think a lot of us focus only on “after death” planning and forget about the living part—like long-term care costs draining the portfolio if you don’t have POAs or a trust set up. That’s where the ongoing ops piece you mentioned is critical.
And yeah, the step-up plus $250k exclusion combo doesn’t get nearly enough attention in RE circles. Totally agree—at the end of the day it’s less about fancy structures and more about keeping control + cash flow steady while you’re still around.
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Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

1y

OP look up my post. What happens if you die?

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William ThompsonBusiness Member
OP
Accountant · Williamstown, NJ · Member since 2025 · 329 posts · 178 votes
1y
Quote from @Henry Clark:

OP look up my post. What happens if you die?

Good question. If you die without any plan in place, your properties go through probate—public, slow, and potentially messy for heirs. With a Will, they eventually get there, but with a Trust + POAs, the transition is smoother and the portfolio keeps operating without losing value. That’s really the key difference.
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Erwin McClainPro Member

Member since 2024 · 50 posts · 15 votes

1y

This is a topic that i'm very interested in discussing, lets talk about it !!!

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Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

1y

OP another estate planning tool is life insurance. Especially for RE investors. If you die and get caught in the middle of a BRRRR, development, etc your property is worth Pennys. Your family won't or can't complete. With insurance they can just sell the property. Take the hit. Knowing insurance will cover the loss. Way less stress.

We took out multiple policies so we could stagger our risk. Keep in mind your age and health can change in getting policies. So instead of doing one large policy we broke it into 3 policies. As some exposure goes away, you can cancel one policy without renewing all of a large policy.

Not an estate or will decision. But far more positive impact on working thru a death of the RE investor to the family.

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William ThompsonBusiness Member
OP
Accountant · Williamstown, NJ · Member since 2025 · 329 posts · 178 votes
1y
Quote from @Henry Clark:

OP another estate planning tool is life insurance. Especially for RE investors. If you die and get caught in the middle of a BRRRR, development, etc your property is worth Pennys. Your family won't or can't complete. With insurance they can just sell the property. Take the hit. Knowing insurance will cover the loss. Way less stress.
We took out multiple policies so we could stagger our risk. Keep in mind your age and health can change in getting policies. So instead of doing one large policy we broke it into 3 policies. As some exposure goes away, you can cancel one policy without renewing all of a large policy.

Not an estate or will decision. But far more positive impact on working thru a death of the RE investor to the family.

That's a really sharp point—you're absolutely right that life insurance often gets overlooked in estate planning for investors. I've seen situations where a BRRRR or development deal left unfinished caused massive headaches for families, and insurance was the only reason they didn't lose everything.
From the tax strategy side, what’s interesting is how life insurance can also tie into liquidity planning and even offset some estate tax exposure depending on how it’s structured.
Curious—have you ever mapped out how those policies integrate with your entity setup and tax plan? That’s usually where I see developers either unlock extra protection or unknowingly leave gaps.
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Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

1y

OP. We map ours to our exposure. Example.

1. Project under Construction

2. Loan balance

3. Loan balance

Not so much individual loan balances but LTV % on our loans. If we have LTV 20% value then we need the coverage. If we have LTV 89% value then we don't need the coverage.

Don’t tie to wills or trusts since they are outside the legal issues.

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Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

1y

OP. Outside trust and will, although impacting them are legal entities. LLC, Partnership and Syndications. Example LLC operating agreement. What happens in death? Valuation? Settlement of debt? Buyout? Transfer of ownership? Divorce? Etc etc. Although these are not trust or will, they will gum up the estate closure so these need to be addressed.

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William ThompsonBusiness Member
OP
Accountant · Williamstown, NJ · Member since 2025 · 329 posts · 178 votes
1y
Quote from @Henry Clark:

OP. Outside trust and will, although impacting them are legal entities. LLC, Partnership and Syndications. Example LLC operating agreement. What happens in death? Valuation? Settlement of debt? Buyout? Transfer of ownership? Divorce? Etc etc. Although these are not trust or will, they will gum up the estate closure so these need to be addressed.

You bring up a really important angle that too many investors overlook. Trusts and wills are only part of the picture—LLCs, partnerships, and syndications create their own estate planning hurdles. I’ve seen operating agreements with no provisions for death, buyouts, or divorce, and it becomes a nightmare for the family and the business.
The key is making sure your entity documents and your estate plan talk to each other so there aren’t conflicts that stall everything out. Most investors don’t realize until it’s too late that these gaps can freeze assets and tie up cash flow.
Have you structured your entities to account for those scenarios, or is that something you’re still mapping out?
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Matt Ruttenberg

Specialist · Grand Rapids, MI · Member since 2020 · 116 posts · 80 votes

1y

Quote from @William Thompson:

Most of us spend years hustling to build a real estate portfolio… but here’s a question I don’t see asked often:

What happens to your properties when you’re gone?

As a CPA, I’ve seen a lot of investors put off estate planning until it’s too late. The truth is: having a Will alone vs. setting up a Trust can make a huge difference for your heirs, especially if you own multiple rentals or out-of-state properties.

Here’s the quick breakdown:

Wills

-Cheaper/easier to set up

-You can decide who gets which property

-BUT: everything goes through probate (public, time-consuming, sometimes costly)

Trusts

-Avoid probate → properties transfer directly to heirs

-Keep your portfolio private (not public record)

-You can set rules (“rental income goes to my kids until they turn 25”)

-More expensive to set up, and you have to retitle properties into the trust

Key tip for investors: If you own property in more than one state, probate could be required in each state. A Trust can help avoid that mess completely.

Curious for the community:

-Do you have your rentals in a Will or a Trust?

-Has anyone here gone through probate with real estate before? How did it affect the family or the portfolio?

Would love to hear different perspectives—especially from those of you who already built estate plans around your RE holdings.

Great post! Another strategy here is if you have pre-tax dollars, you're able to fund a life insurance policy inside of their retirement plan, then buy the policy out with a trust. This is not a taxable event.

Individuals, trusts or relatives are allowed to buy out the policy.

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William ThompsonBusiness Member
OP
Accountant · Williamstown, NJ · Member since 2025 · 329 posts · 178 votes
1y
Quote from @Matt Ruttenberg:

Quote from @William Thompson:

Most of us spend years hustling to build a real estate portfolio… but here’s a question I don’t see asked often:

What happens to your properties when you’re gone?

As a CPA, I’ve seen a lot of investors put off estate planning until it’s too late. The truth is: having a Will alone vs. setting up a Trust can make a huge difference for your heirs, especially if you own multiple rentals or out-of-state properties.

Here’s the quick breakdown:

Wills

-Cheaper/easier to set up

-You can decide who gets which property

-BUT: everything goes through probate (public, time-consuming, sometimes costly)

Trusts

-Avoid probate → properties transfer directly to heirs

-Keep your portfolio private (not public record)

-You can set rules (“rental income goes to my kids until they turn 25”)

-More expensive to set up, and you have to retitle properties into the trust

Key tip for investors: If you own property in more than one state, probate could be required in each state. A Trust can help avoid that mess completely.

Curious for the community:

-Do you have your rentals in a Will or a Trust?

-Has anyone here gone through probate with real estate before? How did it affect the family or the portfolio?

Would love to hear different perspectives—especially from those of you who already built estate plans around your RE holdings.

Great post! Another strategy here is if you have pre-tax dollars, you're able to fund a life insurance policy inside of their retirement plan, then buy the policy out with a trust. This is not a taxable event.

Individuals, trusts or relatives are allowed to buy out the policy.

Thanks for adding that — that’s a solid advanced move. I’ve seen that strategy work really well when coordinated between the CPA, estate attorney, and insurance advisor. Out of curiosity, have you used that structure for clients or in your own portfolio planning?
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Matt Ruttenberg
Specialist · Grand Rapids, MI · Member since 2020 · 116 posts · 80 votes
1y
Quote from @William Thompson:

Quote from @Matt Ruttenberg:

Quote from @William Thompson:

Most of us spend years hustling to build a real estate portfolio… but here’s a question I don’t see asked often:

What happens to your properties when you’re gone?

As a CPA, I’ve seen a lot of investors put off estate planning until it’s too late. The truth is: having a Will alone vs. setting up a Trust can make a huge difference for your heirs, especially if you own multiple rentals or out-of-state properties.

Here’s the quick breakdown:

Wills

-Cheaper/easier to set up

-You can decide who gets which property

-BUT: everything goes through probate (public, time-consuming, sometimes costly)

Trusts

-Avoid probate → properties transfer directly to heirs

-Keep your portfolio private (not public record)

-You can set rules (“rental income goes to my kids until they turn 25”)

-More expensive to set up, and you have to retitle properties into the trust

Key tip for investors: If you own property in more than one state, probate could be required in each state. A Trust can help avoid that mess completely.

Curious for the community:

-Do you have your rentals in a Will or a Trust?

-Has anyone here gone through probate with real estate before? How did it affect the family or the portfolio?

Would love to hear different perspectives—especially from those of you who already built estate plans around your RE holdings.

Great post! Another strategy here is if you have pre-tax dollars, you're able to fund a life insurance policy inside of their retirement plan, then buy the policy out with a trust. This is not a taxable event.

Individuals, trusts or relatives are allowed to buy out the policy.

Thanks for adding that — that’s a solid advanced move. I’ve seen that strategy work really well when coordinated between the CPA, estate attorney, and insurance advisor. Out of curiosity, have you used that structure for clients or in your own portfolio planning?

I'm a 401k administrator, so we've been doing this for quite a while now. We partner with CPAs, advisors and also do this directly with business owners along side some self-directed options.

Really powerful strategy!
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Austin Plough

Homeowner · Western Slope, CO · Member since 2023 · 42 posts · 21 votes

1y

Thanks for this post, William!

My wife & I have recently started the process of drafting our Wills and setting up a Revocable Trust.

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William ThompsonBusiness Member
OP
Accountant · Williamstown, NJ · Member since 2025 · 329 posts · 178 votes
1y
Quote from @Austin Plough:

Thanks for this post, William!
My wife & I have recently started the process of drafting our Wills and setting up a Revocable Trust.

That’s awesome to hear — you’re already ahead of where most investors start. Getting that trust in place will make things much smoother down the road, especially for asset protection and transition planning. Are you also incorporating your real estate holdings into the trust, or keeping those under separate entities?
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Eric Blair

Member since 2024 · 70 posts · 40 votes

1y

I did a trust and will for my kiddos

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William ThompsonBusiness Member
OP
Accountant · Williamstown, NJ · Member since 2025 · 329 posts · 178 votes
1y
Quote from @Eric Blair:

I did a trust and will for my kiddos

That’s great — smart move! Having both a trust and will in place gives your family real clarity and protection. Are you also tying any of your real estate or business assets into the trust yet, or keeping those separate for now?
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Eric Blair
Member since 2024 · 70 posts · 40 votes
1y
@William Thompson well I'm a small time landlord. I placed my properties and some accounts into the trust. Basically if I die, kids get the houses and there is emergency money for family to use to maintain the houses as well as paying them property management fees until the kiddos are grown
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William ThompsonBusiness Member
OP
Accountant · Williamstown, NJ · Member since 2025 · 329 posts · 178 votes
1y
Quote from @Eric Blair:

@William Thompson well I'm a small time landlord. I placed my properties and some accounts into the trust. Basically if I die, kids get the houses and there is emergency money for family to use to maintain the houses as well as paying them property management fees until the kiddos are grown

That’s a really smart move — you’re thinking ahead and setting things up the right way.
I’ve seen a lot of investors overlook that “maintenance and management” part, but having funds allocated for those costs really helps your family avoid stress later on. You’ve basically built a self-sustaining plan — nicely done.
Out of curiosity, did your CPA or attorney help structure the trust with those management payouts, or did you come up with that approach yourself?
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Eric Blair
Member since 2024 · 70 posts · 40 votes
1y
@William Thompson No I came up with the structure myself. I just did the math on what it truly cost to operate the rentals and the time involved and then thought about how best to make everything be self sufficient. The attorney thay drafted the will and trust added other things I didn't consider such as not dead but also not alive (I.E a coma).
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J CastroBusiness Member

Lender · Florida · Member since 2025 · 698 posts · 253 votes

1y

Quote from @William Thompson:

Most of us spend years hustling to build a real estate portfolio… but here’s a question I don’t see asked often:

What happens to your properties when you’re gone?

As a CPA, I’ve seen a lot of investors put off estate planning until it’s too late. The truth is: having a Will alone vs. setting up a Trust can make a huge difference for your heirs, especially if you own multiple rentals or out-of-state properties.

Here’s the quick breakdown:

Wills

-Cheaper/easier to set up

-You can decide who gets which property

-BUT: everything goes through probate (public, time-consuming, sometimes costly)

Trusts

-Avoid probate → properties transfer directly to heirs

-Keep your portfolio private (not public record)

-You can set rules (“rental income goes to my kids until they turn 25”)

-More expensive to set up, and you have to retitle properties into the trust

Key tip for investors: If you own property in more than one state, probate could be required in each state. A Trust can help avoid that mess completely.

Curious for the community:

-Do you have your rentals in a Will or a Trust?

-Has anyone here gone through probate with real estate before? How did it affect the family or the portfolio?

Would love to hear different perspectives—especially from those of you who already built estate plans around your RE holdings.

Hi @William Thompson, great topic to discuss.

For most real estate investors, a revocable living trust is the superior estate planning tool. It provides significant benefits by allowing your heirs to avoid the substantial costs and delays of probate, maintaining your family's privacy, and ensuring continuity of management if you
become incapacitated.

Many investors also choose to have both a will and a trust. In this common strategy, the trust is used to hold and distribute the real estate and other significant assets, while a simple "pour-over" will handles any assets not titled in the name of the trust and names
guardians for minor children.

@William Thompson this would be a great topic you may be able to elaborate in detail, as unfortunately many investors are not familiar with or aware on how they can start the process. You may be able to assist further.

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Lee OuellettePro Member

San Francisco · Member since 2024 · 13 posts · 6 votes

1y

My parents own a lake cottage in Michigan that I’ve turned into a short-term rental. I’m now helping guide them through pulling out the equity and eventually placing the property into a trust under my name. The goal is to simplify things for them — the upkeep and management have become too stressful — while keeping the property in the family. I’m still figuring out the best strategy to make that transition as seamless and beneficial as possible.

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Austin Plough

Homeowner · Western Slope, CO · Member since 2023 · 42 posts · 21 votes

1y

@William Thompson As we are planning now, thinking to put our existing home in the Revocable Trust. Currently, we have first home as primary residence to implement a house hack. Our long-term play is the buy-and-hold strategy, acquiring more real estate over time. Down the road, this home would be a rental as we would move on.

Open to your input on this and how to best structure things; whether that be in Trust, in LLC, or a hybrid approach. Thanks, much!

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Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

1y

Outside of will and trust I would consider the impact of 2 things in your planning. Depends on your estate size.

1. If you or your parent or parents go to a retirement home. $6k to $10k per month. They have to pay before Federal coverage kicks in. You can only have $2k cash to their name. Also they will look back at least 5 years for any asset disposition. If they gave you assets say 2 years before, 100% of it has to come back as an example. So plan dispositions at least 5 years out. Which older people don’t like giving up control.

2. Use the $250k capital gain avoidance. $250k each for spouses, plus $250k for any other listed owner. It is usually better to sell the property and take the tax avoidance versus holding it to generate income. I would rather avoid taxes on $500k appreciation than rent the house out long term.

The will and trust definitely help with probate and to also follow your instructions.

Read my post “What happens if you die?”.

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Mike Berg

Realtor · Willowbrook, IL · Member since 2026 · 3 posts · 1 vote

4mo

William, good topic. I also like the point Henry made about life insurance and operating agreements, because the will vs. trust question is only part of the picture. If the person running the portfolio is suddenly gone, the family still has to keep the properties from sliding backward.

From the real estate side, I think control and valuation are the pieces people underestimate. Someone usually needs clear authority to make decisions, and the family needs a realistic idea of what the assets are worth. Otherwise, a good property can become a problem pretty quickly.

I see this with families selling a parent’s house, too. The house itself may be fine, but the family is dealing with grief, repairs, old paperwork, and different opinions from the heirs. That is a hard time to start figuring out who can sign, what needs to be fixed, and what the property is really worth.

A will may give direction, but a trust can make the transition easier when the property is actually titled and managed correctly. So yes, I like the trust conversation. I would just make sure the real estate side is part of the plan, not an afterthought.

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Calbeny Willfred

Member since 2026 · 15 posts · 3 votes

1mo

Managing multiple rental properties across different locations always brings up the probate headache, and going through that process can drain both time and portfolio privacy.

We went through a similar debate about real estate estate planning nearly a year ago, knowing how overwhelming it feels to protect assets for the family. When we needed clear direction on setting up the right structures, Greeley estate planning attorney Karen Brady helped us navigate the transition from wills to trusts and keep everything secure.

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Estate Planning for Real Estate Investors – Trusts vs. Wills

Estate Planning for Real Estate Investors – Trusts vs. Wills

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