In real estate, it is in the nature of our work that we end up participating in our clients’ life transitions: There are the happy moments like getting married, growing the family, building an investment portfolio and starting or expanding a business. There are the bittersweet ones, like helping your child find a place of their own and returning to an empty nest. And then there are the sad moments such as financial disaster, divorce or the loss of a spouse or loved one.
By planning along the way, you can avoid a lot of pitfalls such as potentially huge taxable events and also help minimize friction and even possible fraud between family members and other parties in interest. At such moments in life, it generally pays to have good tax and legal advice, and that is where it is imperative to make sure the person giving you the advice is a truly trusted and qualified expert.
My real estate Mastermind networking group recently had a prominent local attorney who handles both planning and litigation around real estate assets and how they are acquired, held and/or disbursed, and she gave us revealing insight into the many types of cases she has seen through the years that really drove home the importance of having an estate plan in place.
The essential components of a complete estate plan include a trust, a will, a durable power of attorney and an advance health care directive. If nothing else, she advised that you should execute a will, and while this is best handled by an attorney, she directs people seeking to handle it on their own to the California Statutory Will form the California BAR website, which unlike many other free forms available has provisions specific to California State Law. There is also a relatively new instrument called a Transfer on Death deed that is starting to get used by many people in the absence of a will.
She cautioned that in order to avoid them falling into the wrong hands it is also good to keep your estate planning documents held in a safe deposit box, and equally important to control who has access to that box. Depending on how contentious things might get, the children are not always the best option, and this is where a fiduciary or a trusted friend might be a good idea instead.
With a more complex estate plan, the way title is held or transferred might well be in the name of an LLC, to a revocable or irrevocable trust, a charitable remainder trust, or any number of other entities created to help minimize the possible tax consequences or disputes that might otherwise arise from the transaction. So by the time I get called upon to evaluate or handle a property, the person hiring me often ends up being a counsel, a custodian, a fiduciary, a plan sponsor, a trustee or a successor trustee. It has therefore become a key step in the process to ask clients (a) if they have a trusted attorney who can review things to ensure that their intentions are being accurately reflected, and (b) to make sure that they have authority to sign on behalf of the entity they are representing.
And from that point on, it’s pretty much real estate as usual.