The Connection Between Luxury Real Estate and Generational Wealth

Unlike liquid assets, tangible investments like real estate offer value preservation and reduced risk. Luxury real estate in particular is often thought of as a status symbol, but it’s much more than that. An investment in this type of asset has many benefits along the path to generational wealth.

Purchasing luxury real estate is a little bit different than buying a family home. Instead of simply looking at your local real estate listings, you often need to leverage exclusive real estate networks known for dealing in high-end properties. While you can also attend luxury property auctions as well, it’s these types of connections that can provide access to opportunities not available on public listings.

The main way that these properties are then used with generational wealth in mind always comes down to how they’re structured. Asset diversification, complex ownership structures with succession planning in mind, and all kinds of other strategies to minimize taxes are just a few examples of the types of things to consider. 

After a purchase, maintaining and enhancing the value of the property becomes a top priority. This could be as simple as renovating a bathroom or a kitchen, or it might involve capitalizing on luxury amenity trends. Infinity pools, smart home systems, private elevators, and even full-fledged home wellness centers are just a few examples of luxury real estate trends over recent years.

One area that’s very important to get right is how your luxury real estate investments are managed across generations. This can present a unique set of challenges, some practical and others emotional. This could be either common issues like differences of opinion on how the property should be used and maintained versus bigger ones where the different opinions are around whether to keep the property in the family at all.

The latter issue is one of the main reasons that having the correct ownership structure in place is so important. Without one, things could lead to a messy probate situation after you pass away. It helps that there are some specific rules that must be followed when someone is selling a home in probate, but they vary from jurisdiction to jurisdiction. One example is in England and Wales where a property going through this process cannot be sold until after it has been granted probate, and during this time other people can contest the will.

To mitigate these kinds of issues, you need to do two things. The first is always to keep open lines of communication within the family to make sure that everyone is on the same page, and the second is to regularly consult with professionals who know the ins and outs of the laws in your jurisdiction. It’s not foolproof, but it will give you the best chance to identify problems before they become bigger ones.

Beyond being a status symbol and a great place to live, luxury real estate is an important vehicle for transferring wealth from one generation to the next. Given that market conditions, laws, and family values can all affect your strategy, the best strategy is to have an ongoing plan that’s always being updated.