When You Want Property To Stay In The Family
Many parents who have both children and grandchildren often want to structure an estate plan so that land or property that they own can be enjoyed for many years to come by future generations. Perhaps the parents have seen how much their kids and grandkids (and perhaps even the great grandchildren) enjoy the property.
However, when parents pass away and their property is left to children, property rules apply that may conflict with what the parents are trying to accomplish. Customizing the right legal program can ensure that one rogue descendant, or perhaps even the spouse of one child or grandchild, will not be able to mess up or destroy the family property that you'd want them all to enjoy.
Keeping Property In Family Requires Planning
Maintaining property within a family for generations can provide financial stability, cultural continuity, and a lasting legacy. However, it requires careful planning and execution. Here are several strategies and considerations to ensure your property remains in the family for years to come.
Co-Owners Could Attempt To Sell Their Ownership Interest
Anyone who owns a partial interest in real estate, regardless of how big or small their ownership interest, can sell their ownership interest. Due to rights that co-owners have, family property often gets sold eliminating future descedants from being able to enjoy the property.?
Forming a Limited Liability Company (LLC)
Some owners of property think that by forming a limited liability company (LLC), the owners can keep the property in the family for generations. While owners of property should consider forming an LLC, and transferring their property to it, this is more of a "protection from lawsuits" vehicle than a "keep it in the family for generations" vehicle. Placing the property in an LLC and leaving membership interests in the LLC to your descendants won't prevent an owner/member from (1) selling or disposing of their LLC interest; (2) a member's creditor seizing their interest; or (3) giving or bequeathing their LLC membership interest to a non-family member.
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A Trust Is Often Part of the Solution
These conversations about keeping property in the family for generations often turn toward creating a family trust. Parents would name a trustee or co-trustees (perhaps the "responsible" descendant) who will manage the trust assets for the benefit of all of the children and grandchildren after the parents pass away. Backup trustees would need to be provided for since this trust may be in existence for many decades. A carefully crafted trust will often provide that the descendants (trust beneficiaries) would not be permitted to sell, alienate, or mortgage, their interest in the trust, and the creditors of a beneficiary could not seize a beneficiary's interest in the trust.
Other issues to consider before pulling the trigger on something like this include the gift and estate tax, future Medicaid qualification, leaving funds to the trust to provide for ongoing management and expenses, and perhaps having the parents transfer the property (or their LLC which owns the property) to a revocable trust now (which trust would become irrevocable when the parents die) in order to avoid having the property go through an attorney-involved and court-supervised probate proceeding when the parents pass away.
Open Communication Combined With Legal Planning
And in addition to all of the legal planning that is necessary to put an arrangement into effect, open communication within the family about the future of the property can prevent misunderstandings and conflicts. Involving all stakeholders in the planning process ensures that everyone’s wishes and concerns are at least considered.
Every set of family circumstances is unique. You likely only have one "shot" to get it right. And the decisions that you make (or don't make) will affect your descendants for many, many years to come.
Keeping property in the family for generations is a complex but achievable goal with proper planning and execution. Utilizing trusts, property transfers, and comprehensive estate planning, while maintaining open family communication, can ensure that your property remains a cherished family asset for years to come.