In celebration of our new website look, we wanted to bring back our weekly blog posts. Today’s topic is one that many of us think about from time to time. However, it’s something that we put off working on, and as you can guess, it’s about estate planning.
In this latest series of posts, I want to write about how individuals and families limit themselves in creating a successful rental property business. One of those costly mistakes individuals make is a lack of estate and business planning.
You and your family have spent many years, sometimes a lifetime, acquiring the properties you have in your real estate portfolio. But with all your hard work, did you take time to sit down and create an estate plan or business succession plan for your family? If the answer is no, you need to do this. A good estate plan will not only allow you to express your wishes to provide for your family, but it will also allow you to avoid costly court proceedings, keep many details of your estate plan private, and plan for unexpected life events.
For example, if you do not have any type of estate plan in place such as a living trust or will, your estate will be distributed in court probate proceedings according to California law. The proceedings are public record and subject to review by members of the public. Probate proceedings can be very slow and costly compared to executing a living trust and setting up other non-probate transfers. Your family also could end up paying more for legal services in probate fees, as attorneys are paid a percentage of the arrived value of an estate.
On a side note, besides death planning, many people do not plan for things such as long-term care when they get older or if they ever become disabled and can no longer work. Many people are under the false notion that the government will provide 100% coverage for these unexpected events. With the fiscal problems faced by both state and federal governments, I would not count on any benefits. You need to come up with your own plan to make sure you have the type of care you want. Many families do not look at estate planning as planning for unfortunate events like these, but this is why it is essential for landlords to do an estate plan. I am not saying that you need to run every doomsday scenario with your rental portfolio, but most people gain peace of mind knowing they have a plan in place to provide for their medical and other essential needs if certain events do happen.
