As we age, our needs and desires change, and our homes may no longer be suitable for us. Mature adults often face difficult questions: should I downsize, move in with family, move into an assisted living home, or should I just stay where I’m at? However, this decision becomes much easier when they have a plan in place that establishes what they want to do with their properties.
Consider the story of Mrs. Johnson, a wealthy mature adult who has lived in her large family home for over forty years. Her children have long since moved out, and she finds that her home no longer fits her lifestyle. The upkeep is too much, and she feels isolated in the large house. She decides that it is time to downsize, but she has not prepared a real estate plan. As a result, she finds herself overwhelmed and unsure of where to start.
On the other hand, imagine a family that has recently lost their parents, who had significant real estate assets left in a trust but never discussed what they specifically wanted to do with their properties. The trust doesn’t protect the assets from sibling disputes, and as a result, their children argue and fight. Because real estate cannot be divided, the family is fractured, and relationships suffer for generations to come. This situation could have been avoided if the parents had created a real estate plan.
These two stories illustrate the importance of creating a plan that establishes what you want to do with your real estate assets before you pass on. Whether you want to downsize, move into an assisted living home, or leave your properties to your children, a real estate plan can help you achieve your goals and avoid conflicts down the line. But a real estate plan can do more than just ensure your assets are managed according to your wishes; it can also help your family build wealth through real estate. Mr. and Mrs. Wong, an older couple who own multiple investment properties, have enjoyed passive income generated for years, but they are concerned about the significant capital gains taxes they will have to pay if they sell them. They want to pass on their properties to their children as part of their legacy, but they also want to minimize their tax liability.
In response, the Wongs consulted with a planner certified through the Real Estate Planner℠ program, who suggested using a 1031 exchange. With the help of their planner, the Wongs were able to complete a 1031 exchange to divide their assets and predetermine inheritance for their children while deferring capital gains taxes. Similarly, the Silvas, who also own multiple investment properties, wanted to eliminate the burden of tenant issues and property management in order to enjoy their golden years. In this situation, their planner suggested utilizing both a 1031 exchange and a Delaware Statutory Trust (DST).
Intrigued by the idea, the Silvas work with their planner to identify new investment properties that they can invest in through a DST using proceeds from their 1031 exchange. After successfully completing the exchange, the Silvas are now receiving income, appreciation, and depreciation benefits while simultaneously deferring capital gains taxes and removing the burden of property management. They are pleased with the result and decide to use this strategy as part of their overall wealth-building plan. Utilizing strategies like this in your real estate plan allows you to maximize the value of your assets, minimize capital gains taxes, and create a generational financial plan for your family. Creating a real estate plan involves several important steps, such as assessing your real estate assets, determining their value, and return on investment. You should also consider your future needs and desires. Once you have a clear understanding of your assets and goals, you can then create a plan that outlines how you want your properties to be managed and distributed.
A real estate plan is an essential tool for mature adults. It can help them make informed decisions about their properties as they age, ensure their assets are managed according to their wishes, and explore strategies that can lead to generational wealth for their family. By taking the time to create a plan, older adults can create a legacy that is preserved for future generations. Call or text “PLAN” to 808-754-2225 to create your real estate plan today with a certified Planner today.