The transfer of $25 trillion in real estate from baby boomers and older generations to younger family members will likely cause significant conflict. Weighed down by financial and emotional pitfalls, the passing-down process can result in tax bills, maintenance costs, and disputes over ownership.
However, with a well-planned strategy, families can minimize taxes, costs, and family battles. Here are five secrets to successful real estate inheritances:
1. Transfer Real Estate Through Trusts or Wills
Using trusts or wills to pass down property avoids major tax bills. Parents should consider gifting interest in an LLC that owns the property instead of putting heirs’ names on the deed, saving on transfer taxes.
2. Shield Assets with LLCs and Trusts
Placing homes in a limited liability company (LLC) and setting up a trust for the kids’ benefit shields assets from lawsuits and liabilities. This structure also prevents creditors from putting a lien on shared homes.
3. Outline Home Usage Rules
Parents can put rules in place with an operating agreement, outlining who gets to use the home and how. This helps prevent conflicts over ownership, usage, or redecorating rights.
4. Set Aside Liquid Assets for Maintenance
Inheriting a home can become a financial burden unless parents set aside cash for upkeep and insurance. Using liquid assets like marketable securities or take out a life insurance policy to endow the trust makes it possible for siblings to hold onto the home even if they can’t afford to share expenses.
5. Prepare for the Likelihood of Cash Outs
Parents should plan for the likelihood that some heirs may want to cash out, either because they grow tired of sharing or due to unexpected changes in their circumstances. Creating buyout provisions allows heirs to buy siblings’ LLC interests, even if they don’t have liquidity.
Source: https://www.cnbc.com/2025/08/23/real-estate-wealth-transfer-family.html