Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
People who have actually done it have told me that they formed a corporation for a family business and a personal estate ... and annually issue a prescribed number of 'shares' to their heirs until ownership has been transferred (They retain a controlling 'share'). The overall value is determined by an appraisal at the time the 'Corporation' is formed.
I'm guessing that if the heirs later decide to sell the property, they will be required to pay taxes on a new, stepped-up basis. Does this make sense, or am I missing something (such as estate size or tax implications)?
People who have actually done it have told me that they formed a corporation for a family business and a personal estate ... and annually issue a prescribed number of 'shares' to their heirs until ownership has been transferred (They retain a controlling 'share'). The overall value is determined by an appraisal at the time the 'Corporation' is formed.
I'm guessing that if the heirs later decide to sell the property, they will be required to pay taxes on a new, stepped-up basis. Does this make sense, or am I missing something (such as estate size or tax implications)?
This is a very common tactic among people with large estates. It's called a Family Limited Partnership (FLP). You have described it fairly well.
It only makes sense if your estate is over the tax limit. Or will be. It costs several thousand dollars a year to maintain properly, and have annual appraisals. So for a <$5 million estate, probably not worth it. Over that and it can make sense.
I am familiar with these, ask if you have any questions. Just remember, IANAL.
This is a very common tactic among people with large estates. It's called a Family Limited Partnership (FLP). You have described it fairly well.
It only makes sense if your estate is over the tax limit. Or will be. It costs several thousand dollars a year to maintain properly, and have annual appraisals. So for a <$5 million estate, probably not worth it. Over that and it can make sense.
I am familiar with these, ask if you have any questions. Just remember, IANAL.
Thanks; I figured there must be some common name for this. 'Sadly', we are not quite in the $5M+ estate category. Are there cases where it still makes sense to transfer property this way? (Annual appraisals?)
Very state dependent. I use a living trust and llc's . the STEPUP basis of the trust is handy for taxes.
Up to allowable limits.
We've also used living trusts, durable POA, and other similar vehicles. Overall, I believe the tax picture is only going to get worse and, like many, I'm looking for legal ways to avoid as much 'double taxation' as possible. -- "Gifting", for example, seems like a good strategy.
Many states have a LadyBird deed, named after Lady Bird Johnson. You can google it. It's an alternative to a trust, just for the owned home.
Thanks. That looks like a very interesting alternative to a life trust, in that it seems to allow the owner to retain control of the property during their lifetime (vs a quitclaim deed)
Thanks. That looks like a very interesting alternative to a life trust, in that it seems to allow the owner to retain control of the property during their lifetime (vs a quitclaim deed)
The Lady Bird Deed is actually a property quitclaim deed, made out for the heir, but it doesn't go into effect until the last owner dies. It's legal in Florida and we set up one of these deeds on our retirement house/property for our daughter, so that the ownership of the house automatically goes to her when the last one of us ( either myself or my husband) die. The attorney that helped us write our will suggested that we do this if we wanted to leave our daughter the house, as it won't have to go through probate this way.
We don't have a mortgage on this house, so it wasn't an issue for us, but I'd wonder if there were a mortgage on a property, how that would play into the writing up and carrying out of a Lady Bird deed. Because I know that mortgage lenders consider the terms of a mortgage null and void if the owners whose names are listed on the mortgage change. Unless, of course, they approve of a new owner assuming an old mortgage- I haven't seen that for years!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
