You have worked hard to grow your business and build a strong portfolio of commercial properties. As you start planning for retirement, protecting those assets becomes even more important. Owning property in your name can expose it to legal claims, debts or complications when it passes to your family. A family trust can help protect your property and make the transition process easier.
What happens when property is placed in a trust
When you put commercial real estate into a family trust, you are moving it from your name into a separate legal structure. A trustee, someone you choose, will manage the property based on the instructions you set in the trust. This could be a family member, a professional or both.
There are two common types of trusts. A revocable trust gives you flexibility—you can change the terms as needed. An irrevocable trust locks in those terms but offers stronger protection from lawsuits and creditors. Many business owners choose irrevocable trusts to protect high-value properties.
Practical benefits of using a trust
There are several key reasons why business owners use family trusts:
- Protecting your property: Commercial properties you place in a trust are harder for creditors or lawsuits to reach, which helps shield your investments from future legal or financial problems.
- Reducing estate taxes: Trusts can lower or eliminate estate taxes. That means more of your wealth goes to your family instead of being lost to taxes.
- Private and streamlined transfers: Property in a trust does not go through probate court. This saves time, keeps things private and reduces the chance of family conflicts.
These advantages can make the difference between a smooth transition and a stressful, drawn-out process.
Things to consider before transferring
A trust is not something you set up casually. It takes planning and care. Here are a few things to keep in mind:
- You give up some control: With an irrevocable trust, you will not manage the property yourself. It is important to pick someone who understands your wishes and can carry them out responsibly.
- There are costs and paperwork involved: You will pay legal fees to set up the trust, and there will be some ongoing recordkeeping. Make sure you are comfortable with these requirements.
- Selling property in the trust may create tax issues: Trusts often help with taxes, but some actions, such as selling the property, can have unexpected tax effects. Planning ahead helps avoid surprises.
With the right setup and communication, you can avoid most of the common problems people run into.
Transferring your commercial property into a family trust gives you peace of mind. It protects what you have built and makes life easier for the people who come after you. When done right, it is a smart step in securing your future and your family’s.
