You Take It All With You

HEIR TODAY, GONE TOMORROW

You Take It All With You

Some people say when you die you can’t take it with you.  

One of my favorite real estate teachers, Pete Fortunato, says “You take it ALL with you.  You take all your knowledge.  Everything you know.”

One lady was left with a $2.7 million dollar apartment complex when her husband passed away.  It produced over $200,000 in annual income.  Her financial advisor suggested that she sell the apartments and put the money into an annuity.  She sold the apartments and had to pay capital gains tax and recapture tax on the sale.  Plus a commission.  She was left with about $2,000,000 which she put into an annuity paying about 5-percent.  Her income was now $100,000 per year, less than half of what it was.  

Do you think this is what her husband had intended to happen?  She went from owning an asset that kept growing and producing more income to an asset that continues to shrink due to inflation.

Another one of my favorite real estate teachers, Dyches Boddiford, shared lots of knowledge about asset protection and how to invest with retirement accounts in non-traditional assets.  He loved reading the IRS code and figuring out how to use it to your advantage.  Then he shared the information with others.  I learned alot from Dyches.  Unfortunately he passed away recently.  While we can’t ask him any more questions, I’m sure that he left his family with clear instructions.

Would your beneficiaries know what to do?

Here are three things you can do which can help put your mind at ease and give your heirs less to worry about.

But first, know that I am not an attorney.  These suggestions are based on seeing what happens when someone’s intentions are not known as compared with others which were very clear and written.

ONE.  Seek an estate planning attorney and have documents in place.  

Some states allow for a handwritten will.  But why take a chance and not have the other legal documents in place?  This is a time to seek a professional.

I’ve already seen two cases this year where someone passed away without a will.  This created unnecessary burdens on heirs and left it to someone else to decide how assets are dealt with.  And the heirs have to spend more time and money trying to resolve and handle the estate.

TWO.  Let your loved ones know your intentions.

Your loved ones and heirs should know what your intentions are.  More than one person should know where the will and legal documents are and who the attorney is who drew up the will.

THREE.  Talk with your beneficiaries about your assets.

Many of us spend years building a portfolio that will provide us with passive income at some point.  Some spend more time than others learning the ins and outs of different investment options.  And some people just want an easy solution – someone to tell them what to do.  

It took you  years to get where you  are.  Do your beneficiaries understand why you built your portfolio the way you did?  Or would they make the same mistakes as the widow who sold her apartments and reduced her income by half?

Real estate can provide several advantages as we have discussed in other blogs.  I like to think of it as an IDEAL investment: Income, Depreciation,Equity buildup, loan Amortization and Leverage.  These are detailed more in some of our other blogs.

It is important to remember that these advantages can be attained without being an active investor.  That means  you don’t have to deal with the tenants and toilets.  You can be a passive partner as an investor or lender in a real estate syndication.

Are your beneficiaries aware of the benefits that you enjoy with your assets?  Do they who the professionals are who helped you acquire and/or manage these assets?

It may also be worth asking your beneficiaries what assets they would be interested in.

A friend of mine bought three beach houses and planned to leave one to each of their kids.  And he wants to be fair.  Later he found out the kids don’t really want the beach houses.  By knowing that the kids do not really want the beach houses, he is freed up to sell any of them and free himself of the maintenance.

FINAL THOUGHTS

Losing a family member is hard enough.  By taking a little time to ensure legal documents are in place and your intentions are written with clear instructions, you can save your beneficiaries many headaches.  Passive real estate investments, such as real estate syndications or partnerships, can continue to provide beneficiaries with a stream of income that continues to grow with time.

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