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Estate planning dilemma: To sell or keep real estate intact?

On Behalf of | Jul 27, 2023 | Estate Planning

Estate planning is a crucial process in which you make important decisions about the distribution of assets to ensure your loved ones have financial stability after your death. Real estate is among the most significant assets often considered in estate planning.

Deciding whether to sell or retain the property can feel like a complex dilemma, as either action can greatly implicate your family’s financial future. The following factors can help you make the proper estate planning decisions for your situation.

1. Assessing the financial picture

Consider the value of the property, any outstanding mortgage or debts related to it and your overall net worth. If the property represents a significant portion of your estate and maintaining it would stretch your family’s finances, the more practical choice is selling it. On the other hand, if you have ample financial resources to manage the property’s upkeep and taxes, keeping it intact could benefit your beneficiaries.

2. Evaluating your family’s needs and wishes

Engage in open discussions with your loved ones about their preferences and the impact of keeping or selling the property. For instance, if your relatives have strong sentimental ties to the property and wish to retain it as a family heirloom, consider setting up a trust or gifting it to the next generation.

3. Tax implications

Selling real estate may trigger capital gains tax, depending on the ownership length and its value appreciation. On the other hand, retaining the property may expose your estate to estate taxes upon your passing. Consulting with a professional can help you fully understand the tax implications of either option and make an informed decision that minimizes tax burdens.

Ultimately, a well-thought-out estate plan tailored to your unique circumstances can provide your loved ones with financial security.