In the coming years, baby boomers are poised to pass down an estimated $17 trillion in home equity to their children, according to a recent Freddie Mac survey. But whether or not you’re among the 75% of homeowners in this generation planning to leave your current home or the proceeds from a home sale to family members when they pass away, having a clear estate plan is critical to ensuring your wishes come to fruition.
Without one, your future heirs may face complex ownership issues, potential legal disputes and even the loss of family property.
To help your family plan for the future and protect generational wealth, Freddie Mac is sharing information about some of the pitfalls that may occur in the absence of an estate plan, as well as steps you can take to protect the wealth you’ve built over your lifetime.
Tangled Titles
Heirs’ property, also referred to as a tangled title, is created when a family member dies without a will or court document passing their property to a specific heir or heirs. When this happens, the property may be transferred by inheritance to multiple family members who each have equal rights to use and occupy the property. Unfortunately, this can lead to messy legal disputes among family members, limited access to resources, and loss of generational wealth due to forced sales or costly legal battles.
These disputes are common in this scenario because each heir has shared responsibilities regarding the property. For example, all heirs will be expected to contribute to property-related taxes and upkeep, which can become difficult to manage collectively. Additionally, major property decisions often require agreement among all heirs, which can make it difficult to maintain, improve or sell the property.
As generations pass, the property may be further divided among new heirs, complicating ownership even more. Lacking a clear legal title, heirs often struggle to qualify for resources like home equity loans or disaster relief funds, leaving properties vulnerable to foreclosure or forced sales.
Avoiding Heirs’ Property
Planning for the future helps prevent legal and financial complications like heirs’ property. Here are steps to take to protect your family’s property and wealth:
- Create a will or trust. Work with a trusted legal advisor to create an estate plan that can ensure your property is passed down as intended.
- Establish a power of attorney. Appoint someone you trust to manage your property and financial affairs in your absence.
- Develop a wealth management plan. This can help you and your family prepare for unexpected situations and emergencies.
- Get smart about estate plans and other wealth management topics. Freddie Mac CreditSmart Essentials, a customizable and free online course, has all the tools, resources and lessons you need to help achieve your financial goals.
Taking proactive steps in estate planning is crucial for protecting your assets and ensuring they benefit future generations.
(StatePoint)
PHOTO SOURCE: (c) monkeybusinessimages / iStock via Getty Images Plus
Other articles by HVP News Reporters