A Simple Estate Planning Strategy For Real Estate Investors

"Go as far as you can see; when you get there, you'll be able to see further.” - Thomas Carlyle

We're all in business for more than just mere business-building. We want to build a LIFE.

So, speaking of life, I want to dial in on one component of these questions. I might take up a few more in subsequent weeks and months. But for now ... I want to make sure you have this on your radar -- ESPECIALLY as a real estate investor.

When Alan, our fictional real estate investor (REI), passes away, his assets will be handled in one of three ways.

(1) if our REI had no will, his assets would be distributed as mandated by the state probate code through a court proceeding called probate;

(2) if Alan had a valid will, the estate would still have to go through the probate process, but the court will carry out his wishes as stated in his will; or

(3) if good old Al had a valid living trust (and his assets were re-titled in the name of their living trust), his wishes would be carried out in private, without the court's involvement.

So ... why does this matter to you, as a business owner?

Leaving aside the issue of what happens to the business itself (which is something very much worth its own blog post -- forthcoming at some point), the answer to the question depends on how much you care about what your loved ones have to deal with after you are gone and how much control you want to have as to who gets what, and when and how they get it.

If you do nothing, you get no input on any of these questions and the court and one of your eager family members/friends/creditors who petition the court will make these decisions on your behalf through a process called probate.

Why do you care about probate?

NO WILL. Often, the probate process can take 12-16 months, can be extremely costly, and the process is completely public. The probate process can often lead to squabbling among family members and airs the family's dirty laundry.

VALID WILL. If you leave a valid will, it must go through the probate process described above, but the court will benefit from knowing how you want your affairs handled. Instead of relying on the laws of intestate succession (which is the law that distributes your assets to your family members in the order of their relation to you), the court will pass on your assets to the specific people you have identified in your will.

Through a valid will, you can control WHO gets your assets, but you will have no control as to HOW and WHEN they get it.

LIVING TRUST. On the other hand, a living trust (that has been properly funded) gives you more control. If you are working with someone who has expertise in this field, you can control WHO gets your assets, and WHEN and HOW they get it without the court's involvement. Even better -- with a living trust, it is a private administration and can be handled in a short period of time.

DECISIONS. You may be asking yourself: why would an REI ever choose a will instead of a living trust?

Typically, an investor will choose a will over a living trust for one of two reasons:

(1) they don't know the difference between the two, or

(2) the "cost" of doing a living trust.

There are some obvious advantages to having a living trust over a will, but starting with something is better than nothing. If you are not yet ready to leap into the world of living trusts, then a basic, will-based estate plan is a starting point. In addition to giving the court direction about how you want your assets distributed, a will-based estate plan should also include your advance healthcare directive (which identifies the person(s) who will make healthcare decisions for you, if you're incapacitated) and a durable power of attorney (which identifies the person(s) who will make financial and legal decisions, when you can't).

Call your real estate attorney today and ask them for a referral to an estate specialist.

While we all care about what happens to our assets, every person over the age of 18 needs to at least have an advance healthcare directive and durable power of attorney.

BE THE ROAR not the echo®

Warmly, Janet

I'm grateful for our chance to serve you and your business through these blog posts

Feel free to forward this article to a business associate or client you know who could benefit from these insights.