Leaving a Legacy

What will you leave behind for the next generation, your children and grandchildren, after you're gone?

In previous posts, we discussed investing in real estate as a way to diversify your retirement portfolio, but real estate investing isn't just for retirement.

Wouldn't you like to leave something for the next generation? Something that can provide your children and grandchildren a better quality of life?

Why Real Estate for Generational Wealth?

Real estate is a long term sustainable investment with many advantages when it comes to transferring wealth from one generation to the next. 

For starters real estate isn't going anywhere, especially multifamily. Shelter is a basic human need and the population in the U.S. continues to grow. Some projections expect the U.S. to add nearly 100 million people by 2060. All these people have to live somewhere. 

Not to mention the current trends. Home ownership in the US is the lowest its been since 1965 and the trend doesn't seem likely to reverse anytime soon. Millennials and Baby Boomers, 87 and 76 million in population respectively, represent the two largest demographics in the U.S. and both are turning to renting as an alternative to home ownership

Also, real estate might be a better alternative, or at least a hedge, to passing down a family business. Only 30% of family businesses survive past the first generation. "Lack of communication, trust or next generation competency" are common reasons why these businesses don't survive. Not to mention obsolescence of the core product or service the business was built upon. 

Tax and Estate Planning

If the fundamentals weren't enough, there are tax and estate planning benefits of using real estate to pass on wealth to the next generation.

Utilizing 1031 exchanges can be a great way to accumulate wealth throughout your life, as you can defer capital gains tax until a later date and use that capital to buy larger properties. But eventually you'll have to pay those deferred taxes, right? Not necessarily. When a person passes away, the tax basis on the bequeathed property becomes the fair market value of the property on the date of death. Therefore eliminating the deferred capital gains tax from all the 1031 exchanges done over the years. 

Irrevocable trusts can be a great way to around the estate tax by allowing you to gift property to your heirs today and not having to pass it down later when it has appreciated further.

The tax and estate planning strategies are discussed here simply to bring them to your attention, and should not be taken as advice. Please consult your CPA and/or attorney on the best strategies to use for your personal situation.   

The Bottom Line

If you would like to leave behind a legacy for your children and grandchildren after you're gone, real estate can provide the means for doing so.

Not only are there strong fundamentals, tax and estate planning reasons for doing so, but many wealthy families have already been using real estate to pass on wealth for centuries.   

Babylon Property Group provides private investment opportunities for investors looking to diversify their portfolio outside of traditional securities found in typical 401(k) and IRA plans. For more information please contact us by phone at (631) 253-1609 or email at tcastelli@babylonpropertygroup.com.