How Proactive, Comprehensive Estate Planning Can Help
Do You Own Rental Property? A comprehensive estate plan should address all of your assets. For most people, an estate plan must include three common categories: (1) your home; (2) financial accounts, like your checking and savings account; and (3) personal property. Other types of assets – such as life insurance, retirement funds, and annuities – should also be considered as part of your estate plan.
If you own rental property, however, your estate plan will be more complicated because there are some unique considerations.
Estate Plans & Rental Property
It should come as no surprise that one of the dangers of owning business or residential property is the possibility of lawsuits. A landlord-tenant act claim, a lease disagreement, or an injured visitor or tenant might all end up in court. A well-thought-out estate plan and rental property plan, however, help mitigate this risk.
Protecting Your Assets:
As a first line of defense, a wise landlord buys sufficient insurance coverage. However, there are situations when the insurance policy’s amount is insufficient to pay for harm that a court has awarded. The assets of the property owner become the next target for the prevailing side when this occurs, which brings us to the next level of defense.
Using a Business Entity as Protection:
Using a Business Entity as Protection: But merely submitting the necessary documents to form an LLC is insufficient. To benefit from the liability protection provided by the business entity, the LLC must be treated as a legitimate business entity and all reports, filings, bank account requirements, and other formalities must be satisfied at all times. The second factor to take into account when integrating your rental property ownership with your estate plan is who will handle your assets in the event that you are unable to do so yourself.
Who Is Managing Your Assets:
For the benefit of the trust beneficiaries, a trustee is in charge of administering the assets controlled by a trust. Depending on the assets owned by the trust and the conditions of the trust, the precise obligations of a trustee may change. Even though the rental income helped you become financially successful, institutional trustees or someone from outside your circle of family and friends may frequently sell assets and put the proceeds into other types of investments.
You might or might not wish to use your assets in this way, depending on the outcome. Because of this, establishing an LLC to set up your rental property assets and having the trustee just receive the net revenue from the total operation can be a strategy to guarantee that your money stays invested in the rental property that helped you succeed.
Tax Advantages Through 1031:
While many people think of estate planning and LLCs as ways to save death taxes and leave money for heirs, we can actually assist with a lot more. A 1031 exchange is a method for deferring taxes on rental property sales. Depending on your situation, the complicated eligibility requirements could result in significant income tax savings. We can assist by ensuring that your trust, powers of attorney, and LLC provide your family to benefit from this tax-saving law in the event that you become unable of managing your affairs and become disabled.
You probably put a lot of effort into developing and acquiring your other assets throughout the years, in addition to your rental property. To ensure that you and your family receive the maximum benefits and protection, make sure that your estate plan considers all of your assets. Contact Hudack Law today at (877) 314-4309 Toll-free, please visit areas of service (open link in a new tab) or hudacklaw.com (open link in a new tab).