Using Real Estate for Multi-Generational Planning

If you’re a high-income earner or business owner who has built wealth through real estate—or recently come into capital through a business sale—you may find yourself asking a deceptively simple question:

“Do I have too many properties?”

But the real question might be:
“Am I using my properties in the most strategic way possible?”

Real estate isn’t just a cash-flowing asset class. It’s also a powerful tool for tax mitigation and multi-generational wealth transfer. With the right structure, you can reduce your tax liability, shield wealth from estate taxes, and set your heirs up with both assets and optionality.

Property as a Tax Shelter

Why High Earners Turn to Real Estate

Real estate offers a unique trifecta: income, appreciation, and depreciation.

By owning income-generating properties, you gain:

  • Cash flow
  • Long-term capital gains treatment
  • Deductions like mortgage interest, property taxes, and depreciation

For high earners, these write-offs can offset active income or investment gains—especially when paired with more sophisticated strategies like cost segregation or bonus depreciation.

But the tax advantages don’t stop at the income level. Real estate can also serve as a shelter for capital gains and estate taxes.

The 1031 Exchange: Delaying the Taxman

A 1031 exchange allows you to defer capital gains tax by rolling proceeds from one investment property into another “like-kind” property. You must:

  • Reinvest the full amount (not just the gain)
  • Identify the new property within 45 days
  • Close within 180 days

This strategy allows your real estate portfolio to compound tax-deferred, scaling your holdings while kicking the tax burden down the road.

If you don’t want to directly manage the next property, you can also consider a Delaware Statutory Trust (DST)—a passive option that qualifies under 1031 rules and gives you fractional ownership in institutional-grade real estate.

Using QPRTs and Trusts for Estate Planning

Lower Taxable Estate, Higher Impact for Heirs

If your goal is long-term legacy and estate tax reduction, a Qualified Personal Residence Trust (QPRT) can be a powerful tool. A QPRT allows you to:

  • Transfer a primary or secondary residence to heirs at a reduced gift tax value
  • Retain the right to live in the home for a set number of years
  • Remove future appreciation from your taxable estate

It’s particularly attractive in high-growth property markets or when planning a transfer to children in the next 10–15 years.

You can also place property into:

  • Revocable living trusts to avoid probate
  • Irrevocable trusts to move assets out of your estate entirely and protect against future estate taxes

Irrevocable trusts can be paired with gifting strategies and valuation discounts to maximize tax efficiency while maintaining strategic control.

Gifting Property: Timing and Tax Efficiency

You can gift property directly to heirs during your lifetime to reduce your taxable estate. The IRS allows:

  • Annual exclusion gifts ($18,000 per recipient in 2024)
  • Lifetime exemption ($13.61 million per individual as of 2024, subject to sunset)

The key consideration? Cost basis.
Gifting property during your lifetime transfers your original basis to the recipient, which could result in larger capital gains if they sell. By contrast, property inherited at death typically receives a step-up in basis—wiping out unrealized gains.

Timing your gifts based on both family needs and tax strategy is essential.

How Many Properties Is Too Many Properties?

When Quantity Isn’t the Right Question

If you own multiple homes or investment properties, it’s not about the number—it’s about the strategy behind them.

Ask yourself:

  • Do these properties still fit my cash flow, tax, and estate goals?
  • Am I maximizing depreciation or 1031 exchanges?
  • Is my portfolio too management-heavy for my lifestyle?
  • Have I structured my holdings to reduce estate taxes and transfer wealth effectively?

If your real estate isn’t working for you now and for the next generation, it may be time to rethink the structure—not sell it off.

The Bottom Line: Structure Drives Strategy

Real estate is more than just an appreciating asset—it’s one of the most flexible tools for high earners looking to preserve wealth, reduce taxes, and empower their heirs.

Whether you’re considering a DST to simplify your life post-exit, exploring QPRTs to protect your vacation home, or building a trust structure for your children, the right property strategy can unlock both peace of mind and generational momentum.

At Archipelago Wealth Management, we help founders and high-net-worth families build real estate strategies that do more than just grow wealth—they preserve it across generations.

Let’s talk about how to make your properties work smarter.