Real Estate Distribution to Children
How can you distribute real property assets equally? You could leave instructions in your trust for your home to be sold upon your death, with the proceeds designated to be equally distributed to your children. But perhaps you think that one of your children may like to have your personal residence upon your death. How do you solve the dilemma of equal distribution to your children, if only one of them receives all of your interest in your home?
By making sure your home is controlled by the instructions in your trust, you can be assured that it will be sold or gifted to one of your children. If one child receives the home, to equalize the value to each child, the market value of the house would be determined at your death and the child receiving your home would get less of other assets. If this is still not equal, then you can provide that the child receiving the house can buy it from your other children. By using trust planning, you can leave complete instructions about how you want to distribute any asset.
The issues become more complicated when it involves a family residence that may be desired by more than one family member, especially a cabin, or other vacation home that may be the source of fond memories. What issues should be considered and how can conflict be avoided? Consideration should be given to ascertaining exactly what interest your children have, if any, in receiving the vacation home as all or part of their inheritance. You may have one child who would often use the home, while the siblings may have no interest in the home at all. In this case, you may want to consider leaving the home to the child who desires it, and have the value of this specific gift charged against his or her share of your estate. Or you could give that child a first right of refusal to purchase the property from your estate at its fair market value after your death.
If all of your children have an interest in the property, you may want to leave it to all of them so each would own an equal percentage of the property, or it may be better to leave it to them in a trust?
By leaving the property in a special trust, you can clearly set forth each child’s rights and duties with regard to the use and maintenance of the property. You can provide how the expenses such as taxes and repairs are to be paid. The trust could detail when each child is entitled to use the home. By having these terms in the trust, disagreements among your children can be minimized. The trust could also provide for a mechanism whereby if a child wished to sell his or her interest in the home, the other siblings would have the first right of refusal. Careful planning in advance is the key to a smooth transition of assets, including real estate, after your death.
Jeffery J. McKenna is a local attorney licensed in three states and serving clients in Utah, Nevada, and Arizona. He is a partner at the law firm of Barney, McKenna and Olmstead, with offices in St. George and Mesquite. He is a founding member of the Southern Utah Estate Planning Council. If you have questions or topics that you would like addressed in these Wednesday articles please email him at jmckenna@www.barney-mckenna.com or call 628-1711.