The Intersection of Real Estate and Estate Planning

Transcript

good afternoon everyone welcome to pink mic legal confessions i'm stephanie garces donat of garces law firm where we help individuals prepare for the unexpected and today we are actually covering a very important topic that comes up a lot so aside from estate planning we do a lot of real estate a lot of real estate law and this is very important because there is an intersection between real estate and estate planning a lot of questions that we get have to do with both so we're going to be talking a little bit about that today and we're going to be addressing some of the questions that i get as an attorney regarding this topic now i do spend a considerable amount of time talking about people's estate plans but we always come across the property how do we transfer that into the trust how do we make sure that's protected sometimes there's a division between real property and perhaps commercial property there's vacation property there's so many types of properties so we're going to dive into different types of properties among other things just so that you can understand some of the questions that we get today we're going to be covering that uh if you missed our episode last week we did a frequently asked questions regarding estate planning in general so i know a lot of you have asked me what is the process for getting a will done what is the process for putting a trust together do i need one or the other these are really great questions so i always welcome you to check out our youtube channel or my facebook live page to make sure that you can see that and get more information now just to kind of recap what we're covering today in case you're just joining us as i mentioned today's episode is called the intersection of real estate and estate planning now in general when people are thinking about estate planning when they're thinking about putting together something in place for their family uh they almost always have a piece of property now sometimes they don't however you still want to consider getting your estate plan looked at if you're going to be a first-time homebuyer or quite frankly a first-time seller a lot of stuff is intersected and it really matters you really have to get someone experienced to know what are the different types of properties what kind of trust i should put together for it or not perhaps we do something different so i'm just going to try to answer most of the frequently asked questions that i get all the time so the first one is what are the most common types of properties now this is a very very broad question because there are so many properties that exist for the first most basic one there's residential properties residential properties are where you obviously live perhaps it's a property where you stay with your family you may consider whether or not it's in your name a lot of the real estate really matters as to who's the owner on title what does that mean that means who is on the deed who's the owner this matters when it comes to your estate plan so when we talk about residential properties we're talking about properties where it's your primary residence and it could be a single family home it could be a town home it could be a condo it could be a number of things but that's what the residential property is another residential property that is sometimes considered in the world of residential could be your primary residence is you could live in what's considered a trailer or perhaps you're renting the land but you own the trailer itself that also matters i know we have a lot of questions about that as well so residential really is all-encompassing and you can think about it as your primary residence where you live every day now when we talk about uh properties you have to keep in mind that i just mentioned where you actually live so if you live in a residential place that's consistent residential this is very different than the second type of property that is the investment property investment properties are essentially properties where you are the owner but you don't actually live there it's not your primary residence you perhaps you rent it out to somebody or maybe it's a family member you're renting it out to that happens quite a lot maybe it's a building that has six or less units that is still considered an investment property plenty of people have much more units in their portfolio or the real estate portfolio i'm talking to those of you that are considered investors or have more than one home that's considered an investment property those are super important when we talk about estate planning because you have to understand the difference and we have different plans for residential versus investment properties for a number of reasons another type of property that comes up a lot is commercial commercial properties are the ones where you are doing business there this could be something like a dry cleaner that's a commercial property perhaps you hold the building some people will depending on the line of work they're in you may actually own it for example physicians will own sometimes the center where they do medical work that's a good example also if you like myself an attorney you have other people that rent from you but you own the actual spot that's considered commercial so it's essentially where people are conducting business it's not their everyday home but you do have tenants that is a commercial property you could also be renting out the commercial property yourself and still be the owner seeing plenty of that that also is considered to be commercial another question that comes up in regards to homes is vacation homes those are in a way considered investments however you benefit from them because you're vacationing them yourselves what's really popular now for vacation homes is airbnb or vrbo those are all really popular and also considered to be in the realm of vacation homes that are being rented so vacation homes in the sense that you actually live there is one thing but people are also using their vacation homes to rent those out so we can help you with all of that not only for your estate plan but also the legalities of that that comes up a lot so that's really really popular the other one that comes up every so often is land just basic land that is a form of property for purposes of estate planning and purposes of real estate this should just be a lot maybe you have this lot it's a vacant lot there's no building on it or perhaps there is something on it that's not a building and it's being used for something or perhaps it's just being used for extra space some people have vacant lots for their own reason and that is still considered property and it's considered property for purposes of estate planning so vacant lots or land just land that nothing is on is also considered property for purposes of the question another question that i get quite often is how is property handled in a will now this is a very important question because a lot of people will say i don't know if my will covers the house or maybe it's mentioned in the house how does that work well the most basic answer is if your property and whatever the property type it is it's worth usually over a hundred thousand it's kind of the rule of thumb i'll give or take depending on the situation but let's just use that rule of thumb most properties are then you will consider putting together what's considered a trust to actually transfer and protect that property if something happens to you or you become incapacitated the idea being that the will is not necessarily the best mechanism to actually manage the property while you're living or passed away because it doesn't actually do that for you that's what a trust does that's a big difference between a trust and a will can you mention the property in your will absolutely you can but it doesn't actually do everything that you would want it to do for example leaving it to a certain family member ensuring that there isn't any dispute over it maybe that's the best way to explain it so this sort of thing comes up a lot and property is handled appropriately in a trust assuming it's of a certain amount and most property is but not all of it sometimes if it's less we might consider doing it another way but is usually handled by explaining in the document itself which we put together for you what you want to happen with the property clients will have different types of wishes with this some people say i want to keep it in the family i want it to be my grandchildren's other people will say well i want to leave it up to my children they can decide what happens to it when i'm no longer here some people will even say i want to keep this and make sure that it never gets sold until they absolutely have to or if it gets sold it should be during the first year after i pass something to that effect so you can really customize a trust in an estate plan that is the best thing about it you can really put as much as you want or as little as you want and depending on what you're trying to accomplish in the actual estate plan so that is really how property is handled in the most surface level information i can give you now keep in mind that everything is circumstantial so perhaps if your circumstances are different than others we may consider doing it in in a trust as opposed to perhaps some people put it in an llc sometimes which is a different estate different than estate planning it's actually business business corporation but the point i'm trying to make is that there are different types of advice that we give clients depending on the type of property and what their goals are so that's really how it's handled another question i get often is what happens after an air inherits the property if money is still owed this is a great question and one that we get often the answer to this question is it depends on what the person who has passed away has in place so for example one would think that because you're an error you automatically get the property and there's no issue and even if there's money owed we can figure that out it depends to be quite frank when you're an heir and assuming the person that has passed away actually has something in place of an estate plan pertaining to the property if money is still owned on it there are different options depends how much it is is it a lot is it a little bit that will really influence what happens but let's say there is a property that has a mortgage on it and an air gets it free and clear of any issues because there was an estate plan order many times people will have the option of refinancing to put the property and the mortgage in their name now mortgage companies do have you sign paperwork or the people that have actually bought the house and originally signed paperwork saying that they can recall the law they recall the law when the person passes away this is something that is possible depending on your circumstances it could or could not happen it really is up to the mortgage company so that's really what happens when it comes to that but keep in mind like i said this is very specific to the facts if the person has passed away and doesn't have an estate plan and it is an error and there is still money owed there's still a couple of options maybe not as attractive as the one i just explained but there are still options so if you are looking for that sort of advice please let me know because i can help address those in your particular circumstance now another question that i get that is pretty interesting and a valid question is is it possible to divide ownership of the real estate to more than one person so sometimes people have multiple children parents often want to leave the house to all of them so the shortest answer to that is yes that is the purpose of an estate plan we actually customize it to your needs if you wanted to say i want my children to be one-third owners of this home equally because there's three of them we can do that so everything is customizable it is very possible sometimes people will even say well i only want one child to have this and not divide it we can also do the same for that so it is possible to do you just have to plan accordingly plan ahead all of this if you notice has to be done within enough time and with the right level of expertise because real estate is only one of the one of the factors that comes into estate planning but for many it is the biggest asset that drives the estate plan so we can certainly help you with that now another thing that comes up a lot is spouses so if both spouses pass away at the same time what happens to the property this is very dependent again it's always an it's a question of does this person have an estate plan does this person not have an estate plan that is how we think as attorneys because there's two different avenues that you take in this scenario to take the first scenario if the person that has passed away and there's a spouse that also passed away all at the same time while unfortunate if they have an estate plan in order this can already be we could say taken care of because assuming that the person did come and see me or another attorney to do an estate plan that property is already accounted for the trust perhaps that it's in already drives the property and manages the property the great part about that is that you don't have to worry or we should say the errors or whoever is outlived the people that have deceased don't have to worry because it's already spoken for it's already settled into these trusts and it explains in detail what the intention was with the property upon their passing this is a scenario where both people have an estate plan it's all coincides with each other there's a lot of things that happen to when two owners pass away at the same time it matters how many kids there are are there kids if there's no kids who's out living them do they have brothers do they have sister we really have to do a full inventory of the family so that's like the first option that usually comes up when someone does have an estate plan now sometimes families will still call us because they need to some guidance and what they're doing just because someone has an estate plan doesn't mean we still can't be a service because most times it's legalese and so it's very very tough sometimes for people to understand what is the trust what does it say how do we use it so we can certainly assist with the administration and that or at least the guidance of that as well so we do offer those services outside of just doing the estate work the other option when you don't have an estate plan and the spouses have passed away is quite problematic because as i mentioned before if you don't have an estate plan and the property is in both of your names well there is no one that's going to automatically get the property many times you have to go to probate which happens to a lot of folks that have to go and try to get permission from the court supervision from the court to get someone in charge of that property so you really end up going a whole other direction it's costly it's timely and quite frankly it's a headache however it's necessary and it does have a purpose to try to get everything in order and to close out the estate and typically this is what comes up when the person has passed away and there is no beneficiary to the properties so really court intervention is how that ends up so that is really what happens if both people were to pass away whether you have an estate plan or do not have an estate plan another question i get that is super important is what are the tax implications when considering an estate plan this is a very loaded question because tax implications are really dependent on how much you as an individual are worth at the time of your passing so typically there's a four million dollar mark if you are worth as a whole between your accounts between your properties between all of your financial information that you have that are assets if you are worth more than four million that is where there are some tax indications that are considered when putting together an estate plan anything below that it's a lot more simpler not as complex so it really just depends on what level you're at or what tax bracket you're at quite frankly and how many assets you have in place keep in mind that there are so many maneuvers and different ways to assist with tax implications whether it's debt taxes whether it's taxes on in the state after someone passes away there's a lot of ways to insulate and create silos for stuff like that so that is where an experienced estate planning attorney is a great way to try to soften the impact that taxes could have if you have the proper estate plan in order so it really depends on where you're at but nonetheless there's still a reason to do it and get an estate plan order and currently revise it every time you have you get a change in your in your life whether that's children whether that's i have a new home whether that's i married somebody these life events are things to also consider when it comes to tax implications for an estate plan because if you were single when you created your initial estate plan and perhaps now you're married you may be in a different tax bracket which might actually trigger a new type of estate plan for you but you would only know that if you're constantly revisiting it so this is just something to keep in mind when you guys are thinking about your estate plan the tax implications that come your way always depend on your circumstances now another question i get often and we talk about this quite a lot is are there any ways to avoid avoid the probate process i'll say that again are there any ways to avoid the probate process is a common question that i receive yes there is a way to avoid probate now specific to illinois because you do have to know what state you're in illinois typically allows you to avoid probate not having to go to court or seek court intervention if you have a trust to basically cover all of your things or perhaps a will powers of attorney and a trust altogether so all of this matters because when you have a will one of the most frequently preconceived notions is that oh i don't go to probate because i have a will that is not necessarily true that is one of the biggest myths that i see in my practice for the most part illinois says that if you as a person between your home and your properties that means cars and accounts all of that is worth more than a hundred thousand and there is no trust in place to encompass those assets you will end up in probate now if your assets are less than 100 000 and you're looking at me thinking well i'm not quite at 100 000 i'm definitely less well you may consider still putting a will together and a power of attorney to help direct your state to put the executors in place and remember the world does allow for guardians to be in place but really the answer to this is getting a trust put together to really protect all your assets is the best way to avoid probate in illinois now it's no secret that all of this stuff that we're talking about is probably something that you may have already googled but one of the questions we get a lot is better the taxes is how can i minimize taxes or capital gains for my family again this question is commonly addressed with the proper estate plan and not to mention continuously checking in on your estate plan because some of the viewers you may already have an estate plan you may have made it many many moons ago but that is also a way to minimize taxes and capital gains when it comes to property especially depending on how it's set up whether it's in your name in a trust name uh perhaps in another type of name and what we do with the property while you're living or perhaps when you're no longer living also impacts that question so having an estate plan is always a good idea because it does help minimize any sort of taxes that you could be having to pay if you didn't have an estate plan in place but as i mentioned before even if you have one in place please consider looking at it because just because you have one it may not actually encompass all of your assets that you've gotten since then or perhaps you have an increase in salary or perhaps you've gotten married or perhaps you've inherited some money there are so many instances where taxes and capital gains all comes into play depending on where you're at in your life so make sure you're checking in in your estate plan if you have one we're happy to review it if not you certainly want to put one in place to at least consider minimizing taxes and capital gains for your family now one of the things that we get a lot of questions about is what is different about transferring business or the commercial properties we talked about well it's different in the sense that you want to figure out who owns this property a lot of times when it comes to business and commercial properties sometimes individuals will either have it in their name they are actually the owners of the commercial property or sometimes they'll have it in their llc or maybe is some sort of corporation for purposes of liability and for purposes of protection because sometimes people will do that instead of putting in a trust there's nothing wrong with that but typically there's a difference in that we have to make sure we know who owns it whether it's more than one owner that all factors into how we transfer it which is very different than residential because residential you know there's one or two owners maybe it's three owners sometimes i've seen even four owners but the people are the owners the individuals sometimes business or commercial properties you're dealing with corporations these are entities as opposed to an individual while that's a great way to protect your property there also is a reason why putting an estate plan together and assigning it appropriately to potentially trust is a great method to protect that commercial property outside of just being an llc because i think what we commonly know and for those of you that have commercial properties or are investors you know very well that having an llc or some sort of corporate entity protects you however considering weaving this into your estate plan is a very very important and effective way to protect your family so transferring that in the appropriate method and even having that in your estate plan will benefit your family in the long run so there is a bit of a difference when it comes to transferring those properties compared to residential properties because they're very different now that is really all the questions that i have that usually come up as frequently quest frequently asked questions now i noticed that sometimes too uh one of the questions i get and i just want to make sure people are aware of this is that people will say should i get an estate plan if i don't have property because we've talked a lot about property today should you consider it i always say everyone should have a basic estate plan in order because you never know when you would need it or your family will need it there's a lot of documents that you could put together outside of a trust for example a will powers of attorney living will these are all relevant documents that can also be used when it comes to just doing an estate plan so don't be alarmed if you think oh i don't need it because of xyz or perhaps i only need to have this type of estate plan because everyone is different so one of the questions that came into while we're sitting here is how do trust works regarding the ownership of real estate this is a great question i really enjoy answering this question because it sounds more complex than it actually is and the reason i say that is because people think oh my gosh if i have it in a trust now it's going to be a lot harder to maneuver the property to sell the property my ownership is going to be different and i'm here to tell you that the answer is sort of really the answer is when it comes to the trust a lot of people will put their put their house in their trust let's just talk about residential because the ownership of it will be the trust so you do have the ability when you put your estate plans together to protect that asset and have a trust protected now on paper the owner is the trust and that is really an effective method you can still sell the house you can still do things with the house although the only thing that comes up every so often is the refinancing that becomes an issue once in a while when it's in the trust so that is something that is the exception to the rule but typically the trust really just becomes the owner of the property and the only thing that is for is for estate planning purposes it's very very important for you to consider this because again like i mentioned before it can help you avoid probate it can help your family avoid probate it can actually be an effective way to put someone in charge of the property in the event you become incapacitated or if you pass away and it actually does a lot for your family and that it actually drives the property and really controls it upon your written instructions that you left in your trust so that's really how trusts work regarding the ownership of real estate and again at the most basic level depending on what kind of property it is it's never a bad idea to consider putting a trust as part of your estate plan especially if you have a portfolio of real estate or perhaps just a basic home that is still a reason because again there is no way to just automatically leave the property to someone without a proper estate plan in place and so to avoid the headache and the probate process you may consider seeing me for an estate plan so i can kind of share my knowledge with that and see if that is the best fit for you so i think that wraps up our pink mic legal confessions for today as i always mentioned i'm also thankful for everyone that comes and watches us on tuesdays one o'clock central time if you have any questions any concerns any follow-up of what i mentioned today i welcome you to give us a call you can call or text us anytime we are happy to give free 30-minute consultations to address your needs and your family needs keep in mind an estate plan is always an option you try to make it feasible for all so please don't be shy and giving us a call whenever you have any concern or any questions i welcome you to watch me here again on pink mic legal confessions on tuesday at one o'clock we'll be covering another topic that you'll want to watch so any questions always feel free to reach out thank you so much for your time thank you for watching i hope you have a wonderful wonderful day