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Financial Planning > Trusts and Estates > Estate Planning

What Owning Multiple Homes Really Means for Wealthy Clients

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What You Need to Know

  • Many affluent clients purchase real estate to create experiences for their families and to build a legacy.
  • As their advisor, you need to take into account any additional costs and optimize tax strategies for their additional property.
  • A personalized approach is essential to help clients realize their goals for multiple home ownership.

Many wealthy clients make the decision to purchase an additional home. While increasing property values can certainly be an outcome, most often that’s not their primary motivator. In fact, none of my clients have done so purely as an investment. Instead, they aspire to create experiences and to build a legacy — which is an important distinction to make when guiding them through the financial side of multiple-home ownership.

As an advisor, it’s my job to understand what my clients want to accomplish with their wealth. Family is usually their highest priority. They are focused on creating a legacy — and doing so through shared experiences. They imagine convening their family and friends in idyllic places to share memorable experiences. They are also considering how to financially care for their children and grandchildren, and the values they want to impart.

Account for Additional Costs

If a client is wealthy, they prefer their additional home to be turnkey — when they leave one residence, they simply lock the door and they, or their visitors, can return any time. In some cases, that may require a groundskeeper or property manager who lives on the property full time to maintain it.

This brings up additional costs to account for, beyond just the purchase price. We advise our clients about other costs to prepare for, in addition to property management, such as property taxes, home insurance, security, landscaper fees and maintenance costs.

Also consider the cost of how the client intends to use the home. For example, one client plans for a family trip to their second home each year, which has grown to include 14 grandchildren. As the family grows in number, it becomes a greater expense. They rent an adjacent property to accommodate everyone and cover the cost of transportation, food and entertainment. It may take some financial foresight, but they’re happy to do it since it’s always the highlight of their year.

Optimize Their Tax Strategy

We are focused on being the financial quarterback for our clients and their families’ trusted advisor. That requires working with our clients’ accountants and estate attorneys regarding tax planning and the various ways to tax-optimize the property both at purchase and when it’s passed on.

In the case of a client who has a special property they want to keep in the family, one idea is to put it into a residential qualified personal residence trust. This enables the client to gift the home and freeze its value for tax purposes while retaining the right to live in it for a specified number of years, after which the next generation owns the property. We may also help the client establish an endowment to fund all the expenses for the future of the property.

Capital gains tax is another consideration. We had a client buy a property in Park City, Utah, several years ago. The property tripled in value, and they sold it for a significant gain. We then worked with their accountant to identify tax losses in the portfolio to offset the capital gains on the real estate.

Help Create a Legacy of Giving

For some clients, the legacy they hope to build with their property is a chartable one. We have a client in Montana who serves on the board of a few different nonprofits, so they use an exclusive resort where they own a property as a location to bring people together to connect with the other charities.

Clients who are charitably inclined can also establish a donor-advised fund and make an irrevocable contribution of their real estate. The balance will be reflected in their donor-advised fund account, which can be eventually passed down to their heirs.

That’s the kind of holistic wealth management it takes to guide high-net-worth clients in this pursuit — looking at every aspect of a client’s financial life and identifying how the property relates to their total picture. There’s not one strategy that would fit all. Customization is essential to help clients realize their goals for multiple home ownership.

It’s rewarding as an advisor to play a role in making it all possible. The cherished family memories created by gatherings in the sweeping mountain vistas of Colorado or North Carolina, the expansive ranches of Big Sky Country or the sandy beaches along Florida’s coasts are priceless memories for our clients and their loved ones.

(Image: Shutterstock)

Michael Zizmer, CPWA, is a financial advisor and principal of Zizmer-Jones Private Wealth Management Group of Raymond James.


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