When you own a second home, your estate planning may differ from that of most single homeowners. For one, you should make sure to include the second home in your estate plan. Moreover, you need to choose how to pass it on to your heirs – through a lifetime gift, in your will, or by some other method.
Including Your Second Home in Your Estate Plan
As you work on your estate plan, decide how you want to distribute your second home. For example, you may want your children to have it for future vacations, or you may want it sold off for cash. If the real estate market is on the downswing, it might make more sense to transfer ownership of the house sooner than later. You choose whether you want to make a lifetime gift or have the house distributed along with the rest of your estate after death.
Estate Planning Methods for Transferring a Second Home
Depending on who you want to receive your second home, you can opt for different estate planning methods. For example, if you want one or two people to receive interests in the house after your death, including the house in your will may be a good option. Alternatively, you could contribute the house to your trust, allowing beneficiaries to receive rents from tenants after you are gone.
Some people who want to keep their second homes in the family decide to place them in QPRTs – Qualified Personal Residence Trusts. This special type of trust helps preserve a substantially valuable property in a tax efficient way. You can continue living in your home, and your chosen recipients (often children) will receive the property after a set term of years ends. You also receive a gift tax benefit due to the trust structure. You can talk to your estate planning lawyer about whether a QPRT will work for your second home.
Another option for passing on a second home is creating a family LLC (limited liability company). You give the gift of membership interests in the LLC to your family members, and you also contribute the second home to the LLC. Each membership interest is worth only part of the second home’s total value, and there are often restrictions on transferring the interests. As a result, the gifts usually have a lower value – potentially benefiting your estate in the future when estate taxes are assessed.
Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.