Heirloom real estate, or family real estate, is property that's been in a family for a long time, such as a vacation house, second home, farm or other similar properties - but not business or investment properties. The property is often a sentimental place, possibly bringing generations of a family together around the holidays. A common tendency for people is to leave heirloom real estate in their wills to their children jointly, just like the rest of their estate. But according to Bob Carlson, a retirement expert, that probably isn't the best idea.

Heirloom real estate is a unique asset that deserves special thought and planning. In a recent Forbes article, Carlson suggests having the heirloom real estate owned by an entity, in order to avoid a variety of issues that could arise from a property being passed jointly to children. While an LLC (Limited Liability Company) is Carlson's favorite choice, other options include a Limited Partnership, trust or corporation. What are some of the issues that the above-mentioned entities can help avoid?

When the next generation assumes ownership, assuming it's more than one child, they will have to work out a schedule for property use, as well as decide on how to handle the expenses, all of which can cause conflict. One sibling may want to sell his share because he lives far away or needs the money; this could bring someone unrelated into the mix. Know more about selling an inherited house.

Other issues can arise if a co-owner goes through a divorce or passes away. True, you won't be personally dealing with these conflicts should they occur, but you may rest easier knowing that you've done what you can to avoid creating any rifts between your children.

By creating an LLC or other entity to own the property, the parents passing down the property create the entity and establish all the operating rules that take into account all the possible situations and conflicts that may arise down the road. Setting it up early gives the parents time to adjust the rules and gives the children an understanding of what to expect. The parents can leave ownership of the entity to the children through their estate.

Before you go ahead and do it though, Carlson strongly recommends you have a candid conversation with your children to ensure they really do want to retain the heirloom real estate in question. Maybe one of your children is not interested in jointly owning a property with his or her other siblings, possibly due to all the conflicts that could arise with several people in the mix, each with their own opinion and, possibly, families of their own. Perhaps one or all of them would prefer to sell their share and buy a property of their own. Before getting upset at this prospect, ask yourself this: would you have wanted to share a property with your siblings? Maybe yes, maybe no.