toby mcCosker improves the properties through hands-on management and targeted value-add initiatives. Our efforts result in solid returns for investors and strong economic assets for communities.

1. toby mcCosker

2.  Estate planning for real estate investors and
developers involves anticipating and mitigating the
impact of the client’s death on the client’s business
interests and the client’s family.
 Often the client’s investments are held through
multiple entities, frequently involving unrelated
partners, varying financing arrangements, personal
guaranties, and separate management companies.

3.  Liquidity is needed to provide continuing support for
the client’s spouse and children and, in many cases,
death taxes. Federal estate taxes are due nine
months after a decedent’s death, leaving a short
time to raise cash to pay what can be a sizeable tax
liability. In some circumstances, an estate may
qualify for a special tax relief provision that allows
for estate taxes to be paid in installments over a
period of up to 14 years.

4.  Real estate investors should not assume that one or
more properties can or will be sold or refinanced to
satisfy an estate’s liquidity needs. It is impossible to
predict what the state of the real estate market and
economy will look like when a client dies.

5.  Ensure that each business checking account has in
place an additional authorized signatory. If the client
is the only authorized signatory, it could take weeks
before an executor is appointed by a probate court
and in a position to assume control over such an
account. Absent such an appointment, the financial
institution may treat the account as having no
authorized signer.

6.  Existing loans and mortgages should be reviewed to
determine what impact the developer’s death will
have on these arrangements. In many cases, the
death of a key principal or a guarantor is an “event of
default” under a loan agreement, which could allow
a lender to put greater financial pressure on the
developer’s estate.

7.  When necessary, the developer should determine if
changes can be made to the existing agreements to
allow for the substitution of a separate entity
guarantor following the death of the individual
guarantor. At a minimum, the agreements should
allow adequate time to identify and install a
successor guarantor. In negotiating loan terms of
future developments, try to structure guaranties that
provide maximum flexibility upon death.

8.  Joint venture, limited partnership, and operating
agreements should be reviewed for control
provisions. In joint ventures, partners may have the
ability to block the estate’s choice of a successor
general partner or manager. The developer’s death
may create rights for another partner to take control
of the property.

9.  Another planning strategy is to transfer assets when
their values are low to allow future appreciation to
inure outside of the estate and lower estate tax
liability. For 2019, the federal estate tax exemption
will be $11.4 million per decedent or $22.8 million
for a married couple, and the Maryland estate tax
exemption will be $5 million per decedent or $10
million for a married couple.

10.  Structures that ensure maximum basis step up at the
second spouse’s death, or that could take advantage
of the unused estate tax exemption of a parent or
parents to achieve basis step up, should also be
considered.