Estate Planning for Real Estate Investors

Estate planning becomes more complicated when investment property is part of the legacy. Appreciated real estate can generate income, build wealth, and support future generations, but it can also leave heirs with an illiquid asset, ongoing management responsibilities, concentrated wealth, and shared decisions they may not be prepared to make together.

For that reason, estate planning for real estate investors involves deciding not only who receives a property, but how that property should serve the next generation. Investors need to consider what they actually want to preserve: the physical property, its income, continued real estate exposure, or the wealth it has created.

The answer can shape the ownership structure that follows. Professionally managed multifamily investments can give families another way to maintain real estate exposure while addressing management, ownership, income, diversification, and succession considerations.

How Multifamily Structures Can Support Estate Planning for Real Estate Investors

Direct ownership can work well when an investor has the experience, time, and desire to oversee a property. But for those who want the income and long-term investment potential of real estate without the day-to-day responsibilities of property ownership, professionally managed structures can provide a more passive approach.

Reduce the Management Burden on the Next Generation

An heir who receives an apartment property may also inherit decisions involving financing, capital improvements, insurance, budgets, distributions, leasing strategy, and an eventual sale. Hiring a property manager can reduce the daily workload, but direct owners remain responsible for major investment decisions.

For families that want to preserve real estate exposure without passing those responsibilities to the next generation, a DST or 721 UPREIT may provide a more passive ownership path. In either case, professional teams assume responsibility for many property-level investment and operating decisions that heirs would otherwise need to make themselves.

This can be particularly valuable when the current owner has spent decades developing real estate expertise that the next generation does not have or does not want to replicate.

The succession question is therefore not simply whether heirs should remain invested in real estate, but how much responsibility should accompany that investment.

Make Real Estate Ownership Easier to Divide Among Heirs

Dividing physical property can be difficult among beneficiaries with different priorities. Three siblings can each inherit one-third of an apartment community while wanting completely different outcomes:

Equal percentages do not resolve those competing objectives. All three remain tied to the same physical asset and to decisions involving distributions, refinancing, capital expenditures, and an eventual sale.

A 721 UPREIT exchange option can potentially replace direct ownership of an indivisible property with operating partnership units, or OP units, creating economic interests that may be easier to allocate among family members. A customized ownership transition can provide additional flexibility when several properties or other estate assets are available, allowing the overall plan to account for heirs with different income, liquidity, and investment objectives.

Transfer restrictions, liquidity, tax treatment, and governing agreements still matter, but the central advantage for succession planning is greater flexibility in what each beneficiary ultimately owns.

Preserve Real Estate Income Without Preserving the Same Property

For many long-term investors, an investment property's role in the family portfolio can eventually become more important than the building itself. A multifamily property may have generated recurring income for decades, but preserving that income-producing role does not necessarily require preserving the original asset.

A 1031 exchange can help an eligible owner transition from an appreciated property into replacement real estate while continuing the family's real estate investment strategy and potentially deferring recognition of eligible gain. If reducing management responsibilities is also a priority, a DST may provide a passive replacement-property option.

A qualifying 721 UPREIT exit option can similarly allow an owner to maintain real estate exposure through OP units rather than direct ownership of the original property.

Address Concentration Built Through Long-Term Appreciation

A successful property can gradually become one of the family's largest assets. Passing it intact preserves the investment, but it also transfers its concentration in one property and market to the next generation.

Ownership-transition strategies can provide an opportunity to reconsider that concentration before it becomes the next generation's default portfolio. A DST may provide exposure to a different institutional property, while a 721 UPREIT may provide economic exposure to a broader portfolio, depending on the specific investment. Customized transitions can also allow owners of multiple properties to take different approaches to different assets rather than transferring the portfolio unchanged.

Diversification does not fully eliminate investment risk, but broader exposure can reduce the family's dependence on the performance of a single physical property.

Simplify Property-Level Decision-Making

Even families that agree to retain real estate can disagree about distributions, renovations, refinancing, leverage, and an eventual sale. These decisions can become more complicated as ownership spreads among children and eventually grandchildren.

Families that retain direct ownership can establish governance rules defining who has authority and how major decisions are made. Alternatively, DST and 721 UPREIT structures can shift many property-level decisions to professional sponsors and operating teams, reducing the number of issues multiple heirs must resolve together.

For larger or more complex portfolios, a customized ownership transition can go further by matching different assets with different family objectives. A property intended to remain under family control might stay directly owned, while another could transition to a more passive structure for heirs who do not want operational responsibility.

The benefit is not simply convenience. Reducing the number of property-level decisions that require agreement can make a multigenerational real estate strategy easier to sustain.

A Real Estate Legacy Does Not Have to Be a Building

For an investor who has spent decades building wealth through real estate, a long-held property can carry both financial and personal significance. Some families may want to preserve that specific asset. For others, the more important legacy is what the property has created: income, appreciation, real estate exposure, and wealth for future generations.

That distinction gives families two ways to think about continuity:

The ownership structure should serve the family's future objectives rather than require the next generation to inherit an approach designed for the previous one.

Plan Beyond the Current Generation With Bonaventure

The best time for estate planning for real estate investors is before the next transaction, ownership change, or succession event, which can limit available options. Property owners can use that time to define what they want their real estate wealth to accomplish, discuss potential tax and estate implications with their advisors, and determine whether the current ownership structure still fits the family's future.

Bonaventure brings 26 years of multifamily experience to that conversation, with $2.9 billion in assets under management, 9,209 units, and more than $600 million of sponsor capital invested alongside investors. Through DST offerings, 721 UPREIT opportunities, and customized ownership transitions for qualifying portfolios, Bonaventure can help property owners evaluate potential pathways from today's real estate holdings toward their longer-term investment and succession objectives.

The next step is to begin that evaluation while you still have flexibility to act.

Speak with Bonaventure about how your real estate portfolio can support your family's long-term ownership and succession goals.

*This article is for educational and informational purposes only and does not constitute tax, legal, or financial advice. Bonaventure does not provide tax, legal, or accounting services. Tax laws and regulations are subject to change, and individual circumstances vary. Investors should consult their own tax advisor, attorney, or qualified intermediary regarding their specific situation before pursuing any of the strategies discussed.