The Family Home: A Guide to Passing Property to the Next Generation

You’ve spent decades building equity in your home—it’s more than just an asset, it’s where your family grew up, where holidays were celebrated, where memories were made. Naturally, you want to pass this piece of your legacy on to your children. But without proper planning, that cherished family home could become a source of conflict rather than comfort.

The Scale of the Challenge

The numbers tell an important story: The Silent Generation and Baby Boomers currently own approximately $25 trillion in real estate. That’s a substantial portion of the estimated $105 trillion in assets expected to transfer to the next generation by 2048. Yet real estate remains one of the most challenging assets to pass down successfully.

“Homes have so many memories, and parents want to pass them on to children and want them to continue to make memories there,” explains Jackie Garrod, a regional wealth manager at Northern Trust. “It’s near and dear to their hearts, so it’s a big decision. But parents need to have a conversation with their kids—there may be concerns that parents haven’t considered.”

The Reality Check: Are Your Heirs Ready?

Here’s a sobering statistic: While 62% of older adults plan to leave real estate to their children, 42% of younger Americans say they wouldn’t feel financially prepared to maintain inherited property if they received it today.

What worries them most? Property taxes and maintenance costs top the list at 20% each. Beyond that, 12% are concerned about existing debt on the property, and 11% worry about the legal complexities of real estate ownership.

Five Critical Issues You Must Address

When multiple heirs inherit property, several potential conflicts can arise. Address these before it’s too late:

Maintenance and Repairs — Who handles everything from routine upkeep to major renovations? How are contractors chosen?

Usage Rights — Who gets to stay at the property and when? What happens during peak vacation times when everyone wants to use it?

Decision-Making Authority — Who has the final say when disputes arise? Is it one person, a majority vote, or unanimous consent?

Ongoing Expenses — How will property taxes, insurance, utilities, and maintenance costs be divided? What if one heir can’t afford their share?

Exit Strategy — What if someone lives too far away to use the property, can’t afford the expenses, or simply wants out after a few years?

Without clear answers to these questions, the home you envisioned bringing your family together could tear them apart instead.

The Easiest Solution (That Nobody Wants to Hear)

Let’s be honest: the simplest approach is often to sell the property and distribute liquid assets like cash or investment accounts. These are easily valued, divisible, and don’t require ongoing management or force siblings to coordinate with each other.

“But some people are stubborn,” notes Mark Parthemer, chief wealth strategist at Glenmede. And that’s understandable—sometimes the emotional value of keeping a property in the family outweighs the practical challenges.

If You’re Determined to Pass It On: Start Talking Now

The foundation of any successful property transfer is communication. Have candid conversations with your heirs about their expectations, concerns, and capabilities.

“Parents need to do fact-finding to put together a user agreement that allows heirs to know how to maintain or use it, how expenses will be paid, who does upkeep, or if they will rotate managing it and get a salary,” Garrod advises.

These intergenerational conversations are “the biggest benefit to ensure continued success,” Parthemer says. “Educating the next generation on what the plan is, how it’s structured, and why prevents wealth from disappearing in three generations.”

Legal Structures: LLCs and Trusts

Once you’ve had the conversation, consider formal legal structures to protect the property and your heirs. Two primary options are Limited Liability Companies (LLCs) and trusts, or a combination of both.

Why Consider an LLC?

An LLC provides crucial liability protection. If someone is injured on the property, your heirs’ personal assets are shielded from lawsuits.

While an operating agreement isn’t legally required, experts strongly recommend creating one that addresses:

The Power of Trusts

Trusts offer both protection and estate planning benefits. You have two main options:

Irrevocable Trust — The trust owns the property, not individuals. You give up control and can’t make changes, but the property gains strong lawsuit protection and may reduce estate taxes.

Revocable Trust — You maintain control during your lifetime, and the property remains in your estate. Upon your death, the trust automatically becomes irrevocable, providing protection for your heirs.

The Best of Both Worlds

Many families place an LLC inside a trust to maximize protection. The LLC provides liability protection, while the trust adds another layer of security—particularly important in situations like divorce, where LLC ownership might otherwise be considered part of a marital estate.

Don’t Wait: Start Planning Today

The conversation about passing on property is never easy, but it’s far easier to have it now than to leave your children to navigate these challenges while grieving your loss. The family home you want to preserve as a legacy deserves the same careful planning you put into acquiring it.

Start with honest conversations, document everyone’s expectations and responsibilities, and work with estate planning professionals to establish the legal structures that will protect both the property and your family relationships for generations to come.

To read more about this topic, visit What’s the best way to leave property to children? Here’s what to know.