Protecting Your Self-Storage Legacy: Estate Planning for Facility OwnersProtecting Your Self-Storage Legacy: Estate Planning for Facility Owners

Asset protection: Shield your hard-earned investments from unnecessary taxes and potential creditors.

Business continuity: Ensure your self-storage facility continues to operate smoothly even after you're gone.

Family harmony: Prevent disputes among members by clearly outlining your wishes.

Legacy preservation: Maintain what you’ve built and pass it on according to your desires.

Tax efficiency: Minimize estate taxes and other liabilities for your heirs.

Inventory assets: Create a comprehensive list of all assets, including real estate, equipment, bank accounts, investments and any personal property of value.

Determine objectives: Clearly define your goals for the self-storage business and your personal assets. Do you want the facility to continue operating under family management, or would you prefer it to be sold?

Choose beneficiaries: Decide who will inherit your assets, including the self-storage business.

Select fiduciaries: Appoint trustees, executors and potentially a power of attorney to manage your affairs if you become incapacitated.

Create legal documents: Work with an attorney to draft necessary documents such as a will, trusts and power of attorney.

Review and update regularly: Estate plans should be reviewed and updated periodically, especially after significant life events or changes in tax laws.

Business-succession planning: Determine who’ll take over the management of the self-storage facility.

Buy-sell agreements: If you have business partners, establish agreements that outline what happens to each person’s share upon death or incapacity.

Key-person insurance: Consider policies that can provide liquidity to the business in the event of an owner’s death.

Estate tax: As of 2024, the federal estate tax exemption is $13.61 million per individual (adjusted annually for inflation). Estates exceeding this amount may be subject to a 40% tax rate on the excess. Some states also impose their own estate taxes, often with lower exemption thresholds.

Gift tax: Lifetime gifts exceeding the annual exclusion amount (currently $18,000 per recipient for 2024) count against your estate-tax exemption. Strategic gifting can be an effective way to reduce the size of your taxable estate.

Capital-gains tax: Inherited assets receive a step-up in basis to their fair market value at the date of death, potentially reducing capital-gains tax liability for heirs if they sell the assets.

Income tax: If your estate plan includes trusts, be aware of the compressed tax brackets involved, which can result in higher income-tax rates on trust income.

State-specific taxes: Some states have inheritance taxes, which are paid by the beneficiaries rather than the estate. Consider any state-specific implications in your planning.

Business valuation: Proper valuation of your self-storage business is crucial for tax planning. Consider engaging a qualified appraiser to ensure accuracy.

Charitable giving: Incorporating charitable donations into your estate plan can provide tax benefits while supporting causes that are important to you.

Procrastination: Don't wait until it's too late. Start your estate planning early and review it regularly.

Failure to update: Life and laws change, and your estate plan should change, too. Review and update it every few years or after significant life events.

Overlooking digital assets: Don’t forget to include provisions for online accounts and cryptocurrencies.

Neglecting succession planning: Failing to plan for the continuation or sale of your self-storage business can lead to chaos and financial loss for your heirs.

Ignoring state-specific laws: Estate laws vary by state. Ensure your plan complies with the legislation of all states in which you own property.

Choosing the wrong fiduciaries: Select trustees and executors who aren’t only trustworthy but financially savvy and capable of handling complex business matters.

Lack of liquidity planning: Ensure there’s enough liquid assets to cover potential estate taxes and other expenses without forcing a fire sale of the business.

Not communicating the plan: Failing to discuss your estate plan with family members can lead to confusion and disputes.

Assemble a team of professionals. Work with an estate-planning attorney, CPA or financial advisor who has experience with self-storage businesses and high-net-worth individuals.

Consider a family limited partnership or limited liability company. These structures can facilitate the transfer of business interests while maintaining control and potentially providing valuation discounts for gift and estate-tax purposes.

Explore irrevocable life-insurance trusts. These can provide liquidity to pay estate taxes without the proceeds being included in your taxable estate.

Implement a grantor-retained annuity trust or intentionally defective grantor trust. These advanced estate-planning techniques can be effective for transferring business interests to the next generation while minimizing gift taxes.

Consider charitable remainder trusts (CRT). If you’re charitably inclined, CRTs can provide income during your lifetime while benefiting charities and potentially reducing estate taxes.

Document your wishes beyond assets. Include instructions for your digital legacy, funeral arrangements and any specific wishes for the continuation of your business philosophy.

Prepare your heirs. If family members will be taking over the self-storage business, involve them in operations and decision-making well in advance to ensure a smooth transition.