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you one of the many and growing numbers of people that believe the current real
estate price cycle has peaked? Many apartment owners feel that way and want to
cash out now, but are reluctantly holding on to their properties because they
don't want to pay hefty capital gains taxes. But
what many property owners don't know is that there are ways besides the traditional
1031 tax-deferred exchange to sell your investment property and still not pay
taxes! In order
for you to convert your real estate profits into cash income prudently and effectively,
make sure you do each of the following: 1.
Sell your property without paying capital gains taxes
2. Invest the sale proceeds
safely & securely
3. Protect those assets from unforeseen creditors or
lawsuits
4. Avoid paying estate taxes in the future
How
do you do all that? Allow me to explain step by step: 1.
SELLING YOUR REAL ESTATE WITHOUT PAYING CAPITAL GAINS TAXES There
are several different trusts that will accomplish this goal. Trusts have been
used by the rich for many years, but are not only for the Hiltons and Rockefellers
of the world. Two frequently used trusts are Charitable Remainder Trusts and Domestic
Non Grantor Trusts. In both cases, the proceeds from the sale of your property
will be kept in the trust and invested. By doing so, you don't have to pay Capital
Gains Taxes at the time of the sale and you can receive income payments from the
investment. These are extremely effective Asset Protection and Estate Planning
strategies. A
Charitable Remainder Trust is a popular strategy used to eliminate capital gains
taxes on the sale of an appreciated asset. It will also reduce your taxes by giving
you income tax deductions that can be taken immediately or spread out over years.
A major drawback of this strategy is that your assets are donated to a charity
upon creating the Trust. Although the asses it not "yours" anymore,
you receive a handsome income from it. Eventually that asset will go to the charity
instead of your heirs, so unless you want your heirs to receive that specific
asset, this might not the right strategy for you. (Important note: even though
the asset goes to the charity, there are specific & simple strategies that
can make sure your heirs still receive a very handsome inheritance which is very
often even better than the original asset). Another
Trust commonly used is Domestic Non Grantor Trust. When this trust is used in
conjunction with a Private Annuity contract (not an insurance backed annuity)
the entire proceeds from the sale of your property will be invested in the trust
without paying Capital Gains Taxes when you sell. The taxes are deferred over
your lifetime, and no interest or penalties accrue or are ever due on the unpaid
tax. In effect you use the IRS's money to pay for the IRS's tax bill. This trust
has the following benefits: - Pay
No Capital Gains Taxes When You Sell
- Pay
No Depreciation Recapture Taxes When You Sell
- Pay
No State Taxes When You Sell
- Eliminates
Estate Taxes due upon Taxpayer's Death
- Creates
a Steady & Secure Income Stream for Life or Joint Lives
- Eliminates
the Headaches Involved with Property Management
- A
"1031" Alternative Strategy
- Maximizes
Medicaid Benefits by Protecting Family Assets from Recovery of past Nursing Home
Expenditures
- Provides
Asset Protection in Case of Legal Disputes
- Avoids
Expenses, Delays and Publicity of Probate
2.
INVEST YOUR MONEY WISELY Your
money in the trust must be invested wisely and safely. The investment must have
3 Ps, which are Protection of Principle, Predictability of Income,
and Participation in the market.
I'm
able to inform you with regard to a number of excellent choices when it comes
to safe, prudent investments that offer those benefits. Any investment that offers
only one or two of those benefits should not be considered. I can provide you
more information on those investments at your request. 3.
PROTECT YOUR ASSET Your
money must be protected from unforeseen lawsuits, creditors or con artists. Unfortunately,
our society is a "lawsuit-happy society". Anybody can sue anybody for
anything. You might be sued by your tenants or tenant's guests, contractors, employees,
neighbor's kids, visitors at a garage sale, etc. I know someone who lost all of
her real estate holdings over lawsuits. Your liability insurance won't be enough
in many cases. The trusts I explained earlier will shelter your assets and protect
them. Note that a Living Trust will NOT do this job for you. 4.
AVOID ESTATE TAX Estate
tax (otherwise known as the "death tax") can eat almost half of your
estate value after the exclusion amount. The exclusion amount in 2006 is $2,000,000
($4,000,000 for a couple if titled correctly), but this amount will be much lower
in the future. Any amount over this is subject to the estate tax. Why would you
want to give your hard earned money to the government instead of your loved ones?
If you use the trust structured correctly in conjunction with a private annuity,
there is no estate tax or probate costs!! If
you own any type of appreciated asset and are thinking about selling them, call
me to make an appointment and come in and see me, or make a reservation to come
to one of my up-coming seminars. No obligation whatsoever! But I will probably
be able to hand you the key that will solve your problem. 
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