Homeownership and generational wealth

In 2024, owning a home holds greater significance for individuals in America than ever before. In a world where everything seems available for rent — from scooters and car rides to first-time apartments and even long-term homes — the value of homeownership stands out more.

The "build-to-rent" trend is spreading across the country. If you drive down Highway 36 toward Denver, you'll notice many complexes that resemble condos but are actually apartment buildings. Builders and investment groups have found building and renting more profitable than selling. This trend is now extending to single-family homes. When a home is often completed, its cost exceeds the initial contracted price due to rising supply chain issues and labor costs, making it hard to sell for a profit. Consequently, many builders opt to keep and rent out the property. In some areas, investment groups own a significant portion of homes that would typically be first-time buyer properties, renting them out instead of selling them.

At the same time, studies by the National Association of Realtors® have consistently shown that homeowners typically have a higher net worth than renters. Lawrence Yun, the chief economist for the National Association of Realtors, often presents a graph similar to the one below. It essentially conveys the message: "To build wealth in America, you need to own a piece of it!"

As shown in the graph above, it's clear that homeownership plays a fundamental role in financial well-being. Since owning a home significantly contributes to an individual or family's wealth, it's crucial to safeguard that asset – especially since buying conditions are increasingly difficult for family members who may be first-time homebuyers. While some may say,"I plan to spend all my money, so I'm not concerned about it," it remains essential to have an estate plan once you own a home, regardless of your perspective.

Throughout my career, I've been surprised how many clients try to avoid creating a will and estate plan. However, taking the time to plan ahead can save both money and stress when unexpected events occur. For instance, if a seller passes away between contract and closing, the absence of a will or estate plan can significantly delay the process. If the buyer needs to proceed with their plans, this could result in a lost sale.

Proper planning can help you avoid probate. When you own real estate and die without a will or estate plan, your property must go through probate. This legal process might not always distribute your assets as you would have preferred.

The goal of estate planning

Most people would like to be able to control their real estate while they are alive, but they also want to plan for what happens if they become disabled or die prematurely. They want to distribute their assets to their chosen beneficiaries on their terms and in the manner they prefer.

How to hold title

Consulting an attorney prior to purchasing a home regarding how to hold title is always a good idea. The most common mistake is when a married couple with children from a prior marriage decides to hold title to their home as joint tenants. If their wish is to let their children from the first marriage inherit interest in real estate rather than the new spouse, joint tenants are the wrong answer. Tenants in Common will more likely direct ownership as they intend.

When buying or selling real estate, it's an ideal time to consult with your attorney to ensure your estate planning is up-to-date. While everyone's situation is unique, your estate planning essentials are likely to include:

A will or trust Durable Power of Attorney Beneficiary Designations Letter of Intent Healthcare Power of Attorney Guardianship designations Having an estate plan in effect, well before any need, possibly preserves generational wealth and makes the whole process easier for everyone involved.

Duane graduated with a business degree and a major in real estate from the University of Colorado in 1978. He has been a Realtor® in Boulder since that time. He joined RE/MAX of Boulder in 1982 and has facilitated over 2,500 transactions over his career. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail , call 303.441.5611 or boulderco.com .

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