Many homes in the Westchester area are duplexes or even multi-family homes. There are many residential properties specifically built to house multiple families. Additionally, it has historically been quite common for those acquiring larger residential properties to remodel them into multiple separate dwelling units.
Homeowners generally need to take more care than the average adult when establishing an estate plan. Those who own multi-family homes need to be especially conscientious about how they address their real property holdings. Especially if family members may occupy one or more units and rent out others, proper planning is critical.
A simple will may not suffice
Many people with real property select one beneficiary and name them as the party who should inherit their home in a will. That solution is not ideal in a multi-family home scenario. This kind of property represents not just housing but also a stream of income. It could easily trigger conflict among beneficiaries and even non-inheriting family members who want access to or control over the property.
Frequently, people who own multi-family homes choose to create limited liability companies (LLCs) to own the property. The use of an LLC makes it easier to transfer ownership to the next generation while minimizing opportunities for conflict. The surviving members of the LLC can manage the property, while others may have a right to live there. When an LLC owns the property before an owner dies, there is less risk of unnecessary litigation.
For example, leaving a property to multiple adult children as joint beneficiaries in a will might lead to litigation. Any of those children might initiate a partition action in civil court, asking the courts to force the sale of the property and divide the proceeds among the current owners. An LLC helps prevent probate conflict and can protect the interests of multiple beneficiaries simultaneously.
It offers the additional benefit of limiting legal and financial exposure related to renting a property out to others. Properties already owned by an LLC may not even be part of an estate, which can keep the home out of probate court.
People concerned about leaving a meaningful legacy and preventing conflict among their beneficiaries may need to review their estate plans with a skilled legal team and take special steps for their most valuable resources. Owners of multifamily homes often require more complex estate plans than those with single-family homes or no real estate holdings, and that’s okay.