Trusts are a way to protect assets from probate and may be used in estate planning. A common type of trust is a living trust, where assets are legally protected while the owners are alive. Assets may be put in a trust for a child who can access them only after reaching a certain age. Trusts may be revocable or irrevocable.
1031 Tax-Free Exchange May Help Delay Capital Gains
When you rent out rooms in your home, you're not only living in your primary residence but you're also conducting business. When you're renting out rooms and later decide to sell what taxes do you have to pay? You may owe taxes on the depreciation you claimed and capital gains tax on the investment portion of the property.
Paying For Long Term Care With Property
A trust can be used to shelter assets and give ownership to the trustees of the property, or other assets. However, if the previous owner goes into nursing home care soon after the trust is set up, it can be undone by the state to pay for the original owner's care. While using cash or other assets to pay for long-term care isn't as appealing as having Medicaid pick up the bill, that's what assets are there for.
A Trust Versus Quit Claim Deed
If you wish to leave property to your heirs, a quit claim deed while you're still living isn't the best way to go. Transferring ownership by a quit claim deed can cause a big tax problem and possible gift tax. Putting assets in a trust is a better solution than using a quit claim deed.
Time Limit For 1031 Exchange
A 1031 exchange allows property owners to sell one investment property to purchase another and defer taxes, provided that the new property costs at least as much as the original property. But you typically have 45 days to designate the property to be exchanged and there are other rules for 1031 exchanges. Consult a real estate attorney who frequently does 1031 exchanges before buying or selling.
Protect Assets From Lawsuit On Rental Property
When you own rental or investment property you may be concerned about liability. You may want to transfer your property into a limited liability corporation (LLC), but that could cause your mortgage lender to call your loan in for full payments. There are other ways to protect yourself from lawsuits when you own rental property and aren't ready to pay off the mortgage.
Estate Planning Helps Avoid Excessive Taxes
When you have rental property that you want to bequest to your children you should do some estate planning. You can change the real estate title while you're alive or wait until your passing depending on your estate planning. Depending on how you pass along the property your children may face an increased cost basis when they sell the home, resulting in higher taxes. To reduce taxes on an estate it's helpful to set up a trust as part of estate planning.
Avoid Large IRS Bill With 1031 Exchange
Whenever you sell rental properties, you will not only owe capital gains tax on the sale, but if you have been depreciating those properties, you will also have to recapture the depreciation for the IRS. The only way to defer paying capital gains tax is with a 1031 exchange, which you can use to purchase a replacement property that is as much or more as the property you are selling. If you are looking to sell multiple properties, sit down with an accountant to strategize when to sell properties to take advantages of tax benefits.
Capital Gains Taxes On Appreciated Investment Property
A homeowner is anticipating selling a condo that has greatly appreciated in value and wants to know what the tax implications will be when the sale is completed. The capital gains, or profit, will be based upon the tax basis of the property. To defer taxes on an investment property, consider a 1031 exchange and purchase another investment property that costs at least the same as the one you are selling.
Estate Plan Includes Will And Powers Of Attorney
Do you have an estate plan? You do, whether you intended to or not. If you haven't made out a will or a trust, you have a plan--unfortunately, one that is defined by the laws of the state where you reside at your death. Don't let the state decide important matters like who gets guardianship of your children. Put together an estate plan that includes a will, powers of attorney for health care and financial matters and possibly a trust.
Boyfriend’s Debt May Hurt Homeowner
A homeowner is concerned about her boyfriend's debt. They own a home together, but he is facing large medical bills. Because they are not married, the co-owner is not responsible for the debt but their equity in the home may be at risk.