As families prepare for wealth transfer, advisors are increasingly called upon to help families create strategies that support preservation and grow capital across generations. Real estate continues to play a meaningful role in legacy portfolios —but traditional ownership models can present challenges. Management responsibilities, illiquidity, and concentrated risk often hinder long-term planning.
Fractional real estate ownership may offer an alternative approach—one that seeks to align the stability of real assets with more flexible ownership structures. Depending on the vehicle, it may support goals related to diversification, passive income, and intergenerational planning, while fitting within a broader wealth management strategy.
What Is Fractional Real Estate?
Fractional real estate involves owning a proportional interest in a property rather than owning it outright. This model can apply to various property types—commercial buildings, multifamily units, or institutional-grade assets—accessed through vehicles such as Delaware Statutory Trusts (DSTs), real estate funds, or co-ownership agreements.
In the investment property wealth management (IPWM) context, fractional ownership may help investors balance the desire for passive income and the planning considerations of intergenerational asset transfer.
Why It Matters for Generational Wealth
For high-net-worth families and real estate-heavy portfolios, fractional ownership may offer tools to help address planning challenges across generations.
Flexible Ownership and Broader AccessInstead of passing down a single, indivisible property—potentially causing disputes among heirs—fractional real estate can be divided more equitably. It may allow heirs to inherit interests in multiple properties, promoting diversification.
Passive Income PotentialProfessionally managed vehicles like Delaware Statutory Trusts (DSTs) may allow income generation to continue without requiring the next generation to become active landlords. This structure can support continuity, though income is not guaranteed and depends on market conditions and management.
Estate Planning and Tax Strategy AlignmentFractional ownership interests may be incorporated into trusts, gifted over time, or transferred at stepped-up basis events, potentially providing more strategic control over estate tax exposure. Advisors can coordinate these assets alongside other holdings to help support a more unified estate strategy.
Advisor Role in Structuring Fractional Strategies
Advisors may play a key role in helping clients assess whether fractional real estate fits their long-term objectives. This involves:
- Reviewing concentrated real estate positions to consider reallocation into diversified fractional interests
- Coordinating 1031 exchanges into DSTs as part of a broader tax strategy
- Working with estate attorneys and tax professionals to align ownership structures with legacy goals
- Educating the next generation on the value and mechanics of fractional ownership
By treating real estate as an integrated component of the financial plan—rather than a standalone asset—advisors can support strategies that balance income needs, estate goals, and market exposure.
Final Thoughts
Effective multi-generational planning often extends beyond asset accumulation to include tax strategy, income alignment, and structural flexibility. Fractional real estate may offer one approach for addressing those needs, particularly when managed as part of a broader estate and investment plan.
For advisors serving clients with real estate-heavy portfolios, fractional ownership structures may represent a planning consideration worth exploring—especially when long-term control, passive income, or intergenerational transfer efficiency are key concerns.
The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
Article written by: Story Amplify. Story Amplify is a marketing agency that offers services such as copywriting across industries, including financial services, real estate investment services, and miscellaneous small businesses.
Sources
https://www.realized1031.com/learning-center
