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Gig Harbor Real Estate: Passing a home down to children

In the realm of estate planning, parents often find themselves contemplating what to do with their homes. Decisions can range from passing down the family home to children, thus preserving the family’s history and legacy by way of their property, to selling the home prior to passing to utilize its equity for various needs and desires.

To shed light on the process of estate and will planning, specifically in relation to real estate, I interviewed Annie Arbenz, a local attorney and the founder and partner of the Narrows Law Group in Gig Harbor.

Annie Arbenz

Question: What is your area of legal practice, and how does it pertain to real estate?

Answer: As an estate planning lawyer, I focus on preparing legal documents to handle incapacity and death situations. This includes ensuring that individuals have documents in place to protect their interests in case of future incapacity where they can’t make legal, medical, or financial decisions. I also handle the distribution of assets to beneficiaries and the settlement of debts after someone passes away. Real estate is often a significant aspect of estate planning, as it is a major asset for many individuals and requires careful consideration and planning for its transfer and management. 

Q: What is the first thing someone should do when considering passing down their home to their children when they pass on?

A: The first step is to assess the family’s interest and attachment to the property. In many cases, children may not want the house as their own residence, or they would consider ownership a burden. However, there are cases where certain properties, often referred to as legacy properties, hold great sentimental and generational value, such as vacation homes or waterfront properties, and the children or relatives do want to retain the property to continue to carry on traditions. 

Q: If the children express wanting to retain their parents’ home, how do you go about it with your clients?

A: We usually start with a family meeting where everyone can talk about it and say what they want to say: “I’m not interested,” “I am interested,” or “I may be interested.” This gives us some good information about how to plan and how to incorporate the dynamics of the family best. Often, it ends up in the creation of a limited liability company (L.L.C.) to own the property, which will create structure around how the property is owned and used and can impose restrictions on whether/how it can be sold or transferred to other people. 

Sometimes, I find that while going through the planning and creation of the L.L.C., some children, even if they had expressed interest in owning the family’s legacy property, decide that there are simply too many nuances and costs of ownership that they do not want to or are unable to take on. In that case, we talk about selling the property after death and dividing the assets among the heirs. Every situation is unique, and a conversation with a good estate planning attorney will address the needs and desires of all involved.

A limited liability company can be a good option for families who want to hold on to legacy properties.

Q: What happens if there is no plan in place before a homeowner passes? What happens to the home?

A: Under Washington State law, the estate would be split equally among the surviving heirs, but getting to that point of resolution takes considerably longer and can be more expensive if there is no will or plan in place. With a will, we know exactly what the deceased person wanted and know exactly how that’s going to happen. Without a will, the court/state law has to fill in many gaps, which takes more time and costs the estate more money to resolve. It’s not a “nightmare” in most cases, but it can be frustrating without a will.

Q: Any advice for children who want to retain their parents’ home?

A: Communicate, communicate, communicate. Although talking to your parents about what will happen when they pass on can sometimes feel uncomfortable, having open conversations with them now will alleviate potential headaches down the road. Ask them if they have a will — more than 60% of people don’t — ask them their wishes, and find out who their power of attorney is (it could unknowingly be you!). It’s important that this stuff is done when people are healthy because, if they become incapacitated, they will be unable to legally make these important decisions.