Estate Planning for Real Estate Investors

Real estate prices are rising in the first half of 2021. According to data provided by the National Association of Realtors (NAR), there were 6 million residential real estate sales in the United States in March of 2021 alone. A recent report in the Charlotte Business Journal noted that the city’s real estate market has already fully rebounded from the disruptions caused by the COVID-19 pandemic. The real estate market across North Carolina is competitive.

Whether you are a full time real estate investor or part-time investor who owns a few pieces of property, it is crucial that you are properly protected. Among other things, this means putting a comprehensive estate plan in place. There are some special estate planning considerations for real estate investors. In this article, our North Carolina estate planning attorneys offer five estate planning tips for real estate investors.

Real estate investors must focus on liquidity. Here is an all-too-common scenario: You leave a valuable property investment to a loved one. However, they do not have the financial resources to keep up with basic expenses. They get stressed out and quickly sell the property at an unfavorable price. The good news is that you can avoid this issue with a well-constructed estate plan.

Make sure that you provide adequate liquidity. This means ensuring that anyone who inherits real estate from you has the financial resources that they need to pay monthly mortgage expenses, property taxes, and maintenance costs. You do not want to leave someone with a burden. An estate planning lawyer can help you take advantage of all available options to ensure liquidity and minimize tax burden.

As noted above, it is a problem if your heir does not have the financial capacity to manage real estate investments. It is also a problem if they lack the know-how to to get the most out of the property. For this reason, it is highly recommended that real estate investors develop a comprehensive succession plan. If you own and manage real property, make sure that you give your beneficiaries all of the tools and information that they need to succeed.

It is not uncommon for real estate investors to have mortgages on their properties. Indeed, in some cases, financing a residential property purchase or a commercial property purchase is a sensible investment strategy. If you do have a mortgage on any property, there are certain issues with lenders that should be worked out as part of your estate plan. If you have any questions about mortgage and lender issues, a North Carolina estate planning lawyer with experience advising real estate investors can help. 

Is all of the property you own in North Carolina? If so, your entire estate will fall under North Carolina law. However, if you own real property in another state, you are going to have to consider some of the rules and regulations that apply to that jurisdiction. Multi-jurisdictional issues can make estate planning more complicated for real estate professionals and real estate investors. An experienced estate planning attorney will ensure that you have the right plan in place. 

Finally, it is important to emphasize that real estate investors should not overlook the estate planning basics. While real estate investors face some unique estate planning issues, the basic goals and principles remain the same. You want to protect yourself and your family no matter what tomorrow might bring. By doing the little things right, you will go a long way towards achieving your goals. All real estate investors in North Carolina should have an estate plan that includes:

• A well-drafted will;
• Up-to-date beneficiary designations;
• Durable power of attorney (POA);
• Health care power or attorney; and
• A living will.

At Arnold & Smith, PLLC, our Charlotte estate planning lawyers are driven to provide the highest level of representation and support to each and every client. We have the skills and expertise to help real estate investors and business owners. Contact us today at 704.370.2828 to set up your confidential initial consultation. From our Charlotte office, Mooresville office, and Monroe office, we provide estate planning services to real estate investors throughout the region, including in Indian Trail, Kannapolis, Albemarle, Davidson, Matthews, and Mint Hill.