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Home Ownership

If you have a lot of equity tied up on your property where you gain from a Real Estate sale will exceed $500,000, then you need to investigate a Deferred Sales Trust.  Deferred Sales Trusts are used to increase your cost basis for your purchase and defer the lump sum payment of Capital Gains Tax that you have to pay to IRS at escrow!

Allow me to explain.  If you sell your homes without a Deferred Sales Trust you will be subject to the 20% for Capital Gains tax since the earning exceed the allowable $500,000 exemption for married couples.   Add to that 9.3% for California making your total tax liability as high as 29%!!   Compounding the problem is that if you took depreciation as part of your typical deductions during your holding period, that amount would increase your Tax Liability as well.

Now let’s examine the 7 Benefits of using Deferred Sales Trust:

1) Tax Deferral: The seller is not obligated the make a huge lump sum payment to IRS.  When appreciated property is sold, tax on gain is deferred until receipt of payments.  The seller is

2) Estate Tax Benefits: Using a Deferred Sale Trust accomplishes an Estate freeze for estate tax purposes.

3) Maintains Family Wealth: Helps to maintain wealth within the family since the assets and the proceeds of the sales are managed through the trust.

4) Estate Liquidity:  Deferred Sale Trust strategy converts non-liquid assets into monthly payments.

5) Retirement Income:  Deferred Sale Trust Strategy provides a reliable stream of income for retirement which is critical for baby boomers who are now living much longer than the previous generation.

6) Probate Avoidance: Deferred Sale Trust strategy helps families avoid probate with proper estate planning.

7) Eliminates Risks Associated with Ownership: By utilizing a  Deferred Sale Trust strategy any liability associated with the Asset is rendered neutral.

If you are planning on selling your property and expect more than $500,000 dollars of gain, we can direct you to the attorney team that helps our clients in similar situation.

So, you owe it to yourself and your children not to make IRS rich with a lump sum payment on Capital Gains Tax.    Click below to schedule a call with our Estate Planning attorney who can explain the process to you step by step.

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