Question: I own two homes and have three children. How can my estate plan split the properties fairly?
Answer: First of all, I praise you for asking this question. It shows you have begun to think carefully about how to pass on your inheritance. Many people probably postpone the original plan for a long time. Not only can it produce unpleasant emotions, it can also cause stress when multiple beneficiaries are considered.
Like many challenging life jobs, the best approach is generally to break them down into manageable parts and get professional help if necessary. That’s why we asked our estate planning lawyer for advice on your questions.
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How to divide your home with real estate planning
People like you with multiple children tend to get out of the way in the real estate planning process to make things fair. Then there will be no hostility among the brothers. And there is no malicious intention towards parents who are trying to raise them and leave behind their legacy.
However, certain assets are easier to split evenly between children than others. A $150,000 bank account can be divided into three free-complicated $50,000 parts. Things become more tricky when there are properties or properties involved.
If you have 3 kids and own a home, you cannot leave the kitchen and living room for one child, the master bedroom and two bathrooms for another child, and the remaining bedroom, study and dining room for one third. So, if you own two properties and have three children, it’s important to know how to split things fairly in your estate plan.
Focus on value – not the assets themselves
If you own three properties and have three children, it’s probably easier to plan your property. You will simply leave property for each child.
But that’s not necessarily a fair way to do things. This is because different properties are likely to have different values. In this scenario, it generally makes no sense to get the third property for that purpose.
Instead, you’ll pay to treat your two properties as collective assets of all value, and divide them equally, says Teresa Viera, founder of Modern Legal.
As she explains, when there are more children than the property, you can sell both homes and split the cash between the heirs. But you may not want to do it in your lifetime. Instead, she proposes placing both homes in trust with equal and beneficial stocks. From there, she explains that your child has options.
“You could sell the property, and revenues could be split, or one child might buy the other’s share at fair market value,” she says.
You also have the option to keep both homes if it makes sense for financial or sentimental reasons.
“If children have strong communication and stable relationships, they can co-own with the use and maintenance agreement and home,” Viera argues. However, she warns that such arrangements could introduce other issues. For example, what happens if one child works far from inheritance?
Another mistake that often occurs during the process of real estate planning is making inheritance decisions based on the child’s current financial situation.
“We are pleased to announce that Simasko Law’s lawyer Joseph Fresard said: “What we see is that we think we need to go to a certain individual about our home and other assets. We often see the thought process of “My son needs a place to stay, so the rest of us leave the house with my daughter.” This is often unfair, as these assets probably have very different values. ”
This thought process also rests on the assumption that it may only be true temporarily. For example, if you have two homes and three children, one of them is currently a homeowner and the other two are still saving up to buy, you may be more likely to leave the home with two children you still rent.
However, you don’t know how your child’s financial situation changes over time. For that reason alone, it is not necessarily fair to deny one child who is already a homeowner.
Fresard agrees with Viera that trusting both homes to trust with three children as equal beneficiaries is the cleanest and easiest way to do this, assuming your goal is to split your assets evenly. However, it may not be the case.
Your two properties are major homes and villas, and one of your children has spent the past decades helping you maintain that holiday property, while others never lifted their fingers. You may tend to leave that house to a child who has been constantly stepping up. If so, there are no bad feelings or questions after the fact, as it is a decision to pay to openly discuss with your child.
But one thing Fresde says he won’t do is put multiple children to intensify the act of a ladybird or life estate to inherit the house, as there may be many complications with this approach.
“Trust is usually the way you go to make sure you’re fair to all your kids, and they’ll have an easy time to inherit everything,” he says.
