LIVING WELL, REAL ESTATE:
The Family Residence—what happens to it when you’re gone?
By Ninah Hunter, Real Estate Editor
[November 2019 | San Juan Silver Stage | by Ninah Hunter, Real Estate Editor]
The family residence often means different things to different family members. It usually represents one of the most valuable assets of a person’s estate. For that reason, you may feel compelled to hang onto it until death in order to will it to your family. However, passing on your home to your heirs after your death may not be the most financially prudent thing for you or them and it may have unintended consequences.
Rather than assume your children want the home or are entitled to it, do some preliminary planning. Start by asking yourself, and your spouse or partner, who may be a co-owner of the home, questions like the following:
1. Do you have enough income and assets to see you through the last stages of your life and still maintain the home or to keep you in it?
2. Is the value of your other assets sufficient to equalize the division of your estate between your children (if your goal is to divide it equally)?
3. Does the child (or children) who will be the beneficiary of the family home have the financial wherewithal and commitment to maintain it?
4. Do they now have, or will they have, sufficient income and assets to cover their own needs and those of their children at the time of your death?
5. Is there something else you would prefer to do with the equity in your home or the sale proceeds if sold while you are still alive, e.g., downsize, travel, pay off debt, provide for long-term care, supplement your fixed income, without sacrificing the financial well-being of your family following your death?
6. Is there another better or more appropriate vehicle for passing on your wealth to your offspring (e.g., proceeds from the home invested in an annuity, insurance policy, mutual funds or other investment account)?
7. Do any of your children really even want the home for their own use and occupancy? Or will they just sell it for the money after your death?
Keep it, sell it, will it—there are significant tax consequences to any of these decisions. Consult with your financial and estate planner and your tax adviser. Talk to your real estate broker to determine if selling now or in the near future makes financial sense in light of your overall estate planning goals.
Once you have completed this preliminary planning, it’s time to talk to your family. What better time to do so than during the holidays when you may all be together? I can tell you one of the greatest gifts my parents ever gave me and my siblings was having that discussion and ensuring their estate matters were in order before they left this earth