There are three guarantees in life: birth, taxes and death. The first one occurs without any effort on one’s part. Paying taxes is somewhat controllable and determined by your entrepreneurial spirit, expertise and timing being in the right place at the right time and having the most qualified CPA.
However, death is inevitable, and planning in advance to be prepared with the necessary and required paperwork will enable your heirs to have less of a financial burden and to keep as much of your estate as possible. Another thought is that if you might need to go on Medicaid (we don’t really know the end result based on the BBB that was passed), there is a five-year look-back to see what your assets are to ascertain if you will qualify.
Inheriting a home, real estate, or any other valuable commodity is an excellent way to receive assets from a parent, relative, or friend. But one must be smart and astute in knowing the most advantageous way to accomplish this to eliminate and/or minimize the tax consequences.
It is prudent and smart to hire an elder care attorney and possibly a certified financial planner to assist you in navigating the tumultuous road to making sure your children or whoever is in your will are protected from probate proceedings and the government potentially grabbing a portion or all of your assets.
If you own a home or investment property, having an irrevocable trust will keep those assets from being commandeered by the IRS and control the inheritance tax ramifications, if any.
Utilizing an irrevocable trust can be a strategy for passing on assets to beneficiaries while minimizing potential estate taxes and avoiding probate.
Here’s how irrevocable trusts can achieve this:
- Estate Tax Benefits: When you transfer assets to an irrevocable trust, they are generally no longer considered part of your taxable estate for estate tax purposes. This can be particularly beneficial for individuals with large estates that might otherwise exceed the federal estate tax exemption. However, recent IRS rulings may affect the step-up in basis for assets in irrevocable trusts, meaning beneficiaries might face higher capital gains taxes upon selling those assets.
- Avoiding Probate: Assets held within a properly funded irrevocable trust bypass the probate process, meaning they can be distributed to your beneficiaries more quickly and efficiently than assets included in a will. This can save time, money, and stress for your heirs.
- Asset Protection: Irrevocable trusts can also offer a degree of protection against creditors, lawsuits, and other legal claims.
However, it’s crucial to understand the implications of using an irrevocable trust:
- Loss of Control: Once assets are placed in an irrevocable trust, you generally relinquish control over them. This means you cannot easily modify or revoke the trust’s terms without the consent of the beneficiaries or a court order.
- Complexity and Cost: Establishing and maintaining an irrevocable trust can be more complex and costly than a simple will or even a revocable trust.
- The estate loses the “step up basis” to current market value, for tax purposes as opposed to having a regular trust, as capital gains may have to be paid by one’s heirs.
This is a much abbreviated explanation of how to inherit a home or real estate assets. Therefore, deciding whether an irrevocable trust is the right choice for your estate plan depends on your individual circumstances, the size of your estate, and your goals. Hiring the right professional to assist and guide you today will go a long way in reducing the capital gains for your children and the unfortunate consequences that may occur in the end if you are not properly prepared.
Philip A. Raices, broker consultant of Turn Key Real Estate,
3 Grace Ave Suite 180 in Great Neck, NY 11021-2415
For a free 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns, call
(516) 647-4289 or by email: Phil@TurnKeyRealEstate.Com Search properties at your leisure and convenience at:
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