Helping You Grow Wealth Through Real Estate
A trust is an arrangement where property is held for the benefit of another.
Our discussion here is about using trusts for minimizing or eliminating taxes, but there are also trusts for protecting assets, estate planning, and privacy.
Consider a trust if you:
Also consider a trust if you:
Say that you have a piece of property you want to sell. It has appreciated in value and you want to avoid the capital gains tax that would be due.
Assume that:
w/o Trust | w/Trust | ||
+ Sale price: | $800,000 | $800,000 | |
- Purchase price: | $70,000 | $70,000 | |
- Costs of sale: | $70,000 | $70,000 | |
= Capital gain: | $660,000 | $660,000 | |
x Tax rate: | 24% | n/a | |
- Tax due now: | $158,400 | $0 | (deferred) |
= Cash to invest: | $501,600 | $660,000 |
The seller using a trust clearly has more money available after the sale!
Yes. The IRS recognizes 26 different types of trusts.
Many types of trust exist. Examples include: Bypass, A-B, Private Annuity, Life Insurance, Privacy, Fixed, Discretionary, Asset Protection, etc. For our purpose here, the Charitable Remainder Trust and Private Foundation Trust are of interest.
For our purpose here, a typical trust structure to minimize capital gains taxes could look like this:
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Consider these features of a "Charitable Remainder Trust" or "Private Foundation Trust":
A word about "Private Annuity Trusts"...
In October, 2006, a ruling was made that Private Annuity Trusts cannot be used to avoid capital gains tax. Discuss with your tax professional whether a Charitable Remainder Trust may be a better alternative.
The cost will depend on the attorney and the details of your situation. For our clients only, we can provide referrals.
We use sophisticated techniques to help you growth wealth through real estate. To create a trust, you must consult a qualified attorney. We will work closely with your attorney to handle your transaction in the method that best serves you. For our clients only, we can provide referrals.
Important disclaimer: This is general information, not tax advice. Federal and state tax laws change frequently. We are not tax or legal advisors. Please consult a qualified tax or legal professional before acting on anything described here.
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