If you make good money as a landlord with several rental properties, you may be wondering how to devise a plan to pass on the business to your heirs. The fact is that you have several options.
Before doing anything, though, do chat with the heir(s) you have in mind to check that they are interested in keeping the landlord business going. It could be that they are not interested but someone else is.
A trust for your business
People are living longer these days. Many do not plan adequately to stay afloat years after they retire, and often they go into nursing homes that require them to spend down their assets. In the absence of advance planning, you may find that you have to sell off your rental properties to qualify for government support in a nursing home.
On the other hand, a vehicle such as a trust can let you protect your rental properties for your heirs while not affecting your eligibility for Medicaid.
What structure you give your business can make a difference: for example, a sole proprietorship versus LLC versus corporation. It can be risky to keep your business as a sole proprietorship because if you owe personal debts when you die, your estate includes your business assets as personal assets. Creditors can tap into them to get money for your personal debts. Your heirs could end up with no business because of your personal debt.
Another way to plan ahead is to add your heir(s) alongside your name as co-owners of the business. This can be especially helpful if that means your heirs get hands-on work and experience in being a landlord while you are able to train them.
If you are married and your spouse is not the person you intend to leave the rental properties to, it is even more important to take legal steps to outline your wishes.