Many families have vacation homes, lake houses, farms, or other real properties that are used as gathering places during the holidays or used by various family members when they need a break from their day-to-day lives. In many cases, these properties have been in the family for generations and are the focal point of family lore and the site of decades of pleasant memories.
As we become more mobile and younger generations spread out around the country and the world, properties like these can serve as an anchor that keeps a family getting together year after year, often around the holidays. Not surprisingly, the owners of these places often want to keep them in the family for generations to come so that long-standing traditions continue well into the future. Unfortunately, this can be more complicated than it sounds, particularly when assets need to be divided among several children who may have opposing views as to what to do with assets they inherit.
A Will is Probably the Least Advisable Option
When people consider leaving assets to their heirs, their first thought is typically using a will. While a will may achieve asset transfer, anything that is passed through a will needs to go through probate, which can be expensive and time-consuming. As a result, placing assets into a living trust or creating an entity like a limited liability company to own the asset is usually a better plan.
Consider the Pitfalls of Joint Ownership
It’s also important to consider how complicated things can get when siblings or other family members with separate lives jointly own real estate. Some of these complications may include the following:
- Creating a schedule that determines which owner has access to the property at a given time
- Determining who has access to certain facilities or rooms
- Determining who can store vehicles, clothes, recreational equipment, or other personal assets at the property
- Establishing a formula for the shared financial responsibility of maintenance expenses
- Disputes arising from competing opinions of what to do with the property
Entity Ownership Can Alleviate Many of these Issues
Fortunately, many of these problems can be avoided or mitigated by creating an entity to own the property. Typically, an LLC is a highly sensible option as they combine the flexibility of a partnership with the limited liability of a corporation. The owner of the property can provide heirs with a percentage of ownership interest in the company rather than joint ownership of the property in total. In addition, the LLC can have bylaws that prevent owners from selling their interest to people outside of the family, requiring a committee to make decisions regarding the management and maintenance of the property, and providing a procedure that allows family members to buy the interest of LLC members who want to sell. LLC ownership can also reduce the value of the property which can result in favorable tax consequences.
Call Us Today to Speak with a Utah Estate Planning Lawyer
These are just a few of the benefits that entity-ownership of real estate can provide people who wish to leave their property to future generations. To schedule a consultation with an estate planning attorney in Utah, call our office today at 801-783-2515 or contact us online.