How should investment property be held from an estate planning perspective?

Question

What is the best way to hold investment property from an estate planning perspective and to be passed down to heirs? My CFP told me under person name is ok. Looking to see if there are differing opinions. This is pertaining to state of Florida.

Also a side question: Do you buy Umbrella policy coverage amount 'equal' to the total amount of all your investment properties and personal net worth? It was mentioned by my insurance agent in the past. Appreciate all answers. Thanks.

Jonathan Bock · Answer

So much more to this question....

Your advisor did you a disservice with a simple answer with no basis for their recommendation. Many advisors myself included do estate planning for their clients it's nuanced and complex.

Bill Hampton · Answer

@Kevin S.

I recommend putting all properties/accounts into a revocable living trust for estate planning.

I would also recommend umbrella insurance equal to your net worth. Umbrella policies are usually only a few hundred dollars per year.

Good luck.

Kevin S. · Answer

@Jeff S.

Thank you, Jeff. It is really confusing with so many differing opinions. Hard to conclude which is the right one :(

Jeff S. · Answer

@Kevin S. I like one of our attorneys viewpoint (from our REI) who owns lots of property, He holds properties that have mortgages in his own name and holds larger properties where he has partners in an LLC. Your advisor is right on in my book.

Jonathan Bock · Answer

@Kevin S.

Great question legacy planning is hard enough with family dynamics, add in illiquid and non divisible property for another layer of fun!

I don't think your planner was trying to steer you wrong but it's tough to empathize if you've never experienced owning a family business/real estate.

Growing up in the business you just have a deeper understanding of its challenges.

Kevin S. · Answer

@Jonathan Bock

Kids are still young to make that determination. Nobody ever asked that question nor did that occur to me. You are making me want to pose the next question here on BP...Why is it so much more difficult in reality?? I'll reach out to you if I decide for a second opinion. Thanks.

Jonathan Bock · Answer

@Kevin S.

Having a will alone still puts you in the minority of the population so good job on that !

We would still need more information to really understand your case.

My thoughts on inheriting bricks and sticks are a tad contrarian: Do your children want to be in this business? Holding RE till death is always great in theory but reality makes it so much more difficult.

Kaden Nguyen · Answer

Kevin, my investment properties are held in a 3 tier structure: operating LLC - Holding LLC - Living Trust.

Hope this helps. If you like more details please reach out and I’ll be glad to provide what I know.

Kevin S. · Answer

@Jonathan Bock

Thanks for your response. The CFP told me 'as long as our Will mention them as beneficiaries and have Umbrella policy.' He just completed my overall financial planning.

Shawn McCormick · Answer

@Kevin S. I hold all of my properties in land trusts with a third party trustee. My LLC is the beneficiary of the trust. Land trusts provide excellent anonymity and then your LLC should provide the protection you want. Although I've been using trusts for years, I am literally just doing my estate planning and my attorney said I did everything right to be able to pass my properties down to my kids. I have two great trust attorneys if you'd like to give them a call.

I'll let someone else chime in about the insurance piece.

How should investment property be held from an estate planning perspective?

How should investment property be held from an estate planning perspective?

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