Introduction:

When crafting an estate plan in California, it’s crucial to address the multifaceted aspect of real estate ownership to ensure a seamless transition of assets. Real estate can often be the most significant component of an individual’s estate, and adequately addressing it is essential for comprehensive estate planning. Depending on when you purchased or acquired California real estate, there is a good chance that the property has appreciated in value, or is likely to appreciate in value. for this reason, when crafting your estate plan, your real estate portfolio requires additional thought that should not be overlooked. Sometimes it’s not always as straightforward as simply choosing a beneficiary to receive the property following your passing.

Fortunately, an experienced San Diego estate planning lawyer can assist you through this process.

When drafting your estate plan, here are ten pivotal questions to consider.

1. What Real Estate Do You Own and Who Do You Want to Receive Your Real Estate?

Evaluation:

Begin by taking stock of all your real estate assets. List each property, including primary residences, rental properties, vacation homes, and any undeveloped land. This foundational step is crucial for the subsequent planning stages.

Then list who your potential beneficiaries are and the relationship you have with them. How old are your beneficiaries? Are they related to you?

2. How is My Real Estate Titled?

Ownership Structures:

Identify how each property is titled – whether individually, jointly, or through a business or trust. The title structure profoundly influences how the property is handled in estate planning and taxation.

Common ways to hold title in real estate can be:

Tenants in Common
Joint Tenants
Husband and Wife, as Community Property with Rights of Survivorship
Individual as sole and separate property
In a Trust
LLC

3. What is the Value of My Properties?

Appraisal:

Obtain current appraisals to know the market value. This valuation will play a significant role in tax planning and distribution to heirs.

4. What Are the Tax Implications?

Tax Liability:

Understand the potential tax liabilities, including property, capital gains, and estate taxes. California’s Proposition 19 has nuanced tax implications that should be understood and planned for.

5. How Should I Distribute My Real Estate?

Beneficiaries:

Decide how you wish to distribute each property. Consider the beneficiaries’ individual needs, preferences, and their ability to manage real estate.

Will my beneficiaries use the real property as their primary residence in the future?
Should I distribute the real estate into the names of my beneficiaries where there names will be on the deed upon my death?
Should I distribute the real estate in an Asset Protection Trust to my beneficiaries?

These questions are all incredibly important to consider for purposes of Prop 19 and transfer tax reassessment purposes.

6. Is there a mortgage on the property?

Who will assume your mortgage?:

Under the Garn-St Germain Depository Institutions Act of 1982, lenders cannot enforce the due-on-sale clause in certain situations, such as property transfers between family members upon death, during a divorce, or into a living trust.

7. How Can I Protect My Real Estate from Creditors?

Asset Protection:

Explore strategies to protect your properties from potential creditors’ claims, lawsuits, or other liabilities. Legal tools like LLCs or trusts can offer enhanced protection.

8. Is My Real Estate Suitable for a Trust?

Trust Incorporation:

Consider incorporating trusts to avoid probate, provide for privacy, manage tax implications, and ensure a structured distribution of assets.

Revocable Living Trusts are best for probate avoidance and privacy. You can build in estate tax and capital gains tax planning strategies within your Revocable Living Trust.

Who will be responsible for the expenses of the property, including taxes and upkeep, during the administration process?

9. How Does California Law Affect My Estate Plan?

Legal Landscape:

California has specific laws regarding real estate and estate planning. How do these laws impact your properties and your overall estate?

10. Should I Consult with a Professional?

Expert Guidance:

Consider seeking advice from an estate planning attorney, especially one well-versed in California’s complex legal and tax landscape, to ensure your estate plan is robust, compliant, and optimized for your specific circumstances.

Conclusion:

The intertwining of real estate and estate planning is intricate, necessitating thorough scrutiny and strategic planning. By addressing these ten questions, you embark on a journey of crafting an estate plan that not only stands the test of legal and financial scrutiny but also honors your legacy and provides for your heirs with foresight and diligence.

Call to Action:

Embarking on estate planning, especially where real estate is involved, requires nuanced insight. Reach out to our team of seasoned estate planning professionals at Peaceful Warrior Law in San Diego, California, to guide you through each step, ensuring peace of mind and a legacy preserved. Contact us today for a personalized consultation.

If you own real estate, chances are you have purchased insurance to protect your assets against damage or loss. But have you taken the necessary steps to protect your assets against lawsuits or probate?

If you own rental properties, there is likely a nagging fear in the back of your mind about being sued by one of your tenants. And if there isn’t, there probably should be. It’s a major risk.

And while it may be heartbreaking to think about, there is always a chance your death could trigger a family feud over your home, vacation home or other real estate investments.

Two common estate planning tools for real estate asset protection include limited liability companies (LLCs) and trusts:

LLC

If you have income-producing property, then an LLC probably makes sense for you, since it protects your personal assets from lawsuits or claims that result from your ownership of the real estate. LLCs may also offer owners privacy since the property can be listed in a company name, not in your name directly. However, you must be sure you maintain the LLC properly so the planned for protections remain intact. It’s not too difficult though, especially with counsel.

TRUSTS

If you own vacation home property that you do not rent out on a regular basis, then a trust may be a better choice for you. There are several options: a Qualified Personal Residence Trust (QRPT) is an irrevocable trust (meaning it cannot be changed without the consent of the beneficiaries) that allows an owner to use the property for a fixed term, and then pass the property on to heirs. This is a commonly used structure to reduce the size of your estate for estate tax purposes.

A revocable trust (which can be changed without consent of the beneficiaries) is more flexible and, if you choose a dynasty trust, can last for multiple generations. The major benefit of the revocable trust, besides control of what happens to the assets after the death of the grantors, is that it keeps your assets out of the hands of the Court after your death, and totally within the control of your family.

You can also use a combination of LLCs and trusts to protect real estate assets if you have a combination of primary residence and rental properties. We can help you decide on the best course of action for your individual circumstances.

This article is a service of Brittany Cohen, Esq., Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.