| Over the past several years, many people have | | | | from a 1031 Tax-Free Real Estate Exchange? |
| made big profits in the real estate boom-at | | | | |
| least on paper, before calculating the | | | | With a 1031, you must buy another "like-kind" |
| capital gains tax owed. Now that the real | | | | investment property in order to avoid paying |
| estate market is leveling off, and even | | | | capital gains tax. You must name the new |
| predicted to dip, many property owners are | | | | property you plan to buy in 45 days, and the |
| beginning to realize that once taxes are | | | | new property must cost at least as much as |
| paid, the remaining balance is far less than | | | | what you sold the old property for. If you |
| they anticipated. | | | | choose not to reinvest, the government |
| | | | expects you to hand over the capital gains |
| However, with strategic implementation of a | | | | tax and depreciation recapture tax |
| powerful, tax-efficient selling resource, | | | | immediately; meaning you'll be hit hard right |
| there is finally a way to sell real estate, | | | | when you're ready to finally reap the fruits |
| including both primary residences and | | | | of your real estate investments. |
| investment properties, and not pay exorbitant | | | | |
| capital gains on real estate. The solution is | | | | There are plenty of heart wrenching stories |
| called a Private Annuity Trust, an investment | | | | about real estate investors who banked their |
| strategy that allows you to not only defer | | | | entire lives on retiring with the profits |
| capital gains taxes, but to protect your | | | | from their investments, only to find that |
| remaining assets via a trust, transfer wealth | | | | they would not be able to live the lifestyle |
| to beneficiaries without taxation, and create | | | | they envisioned after the taxes were paid. |
| a lifetime of income from the value in your | | | | |
| property. | | | | On the other hand, with the Private Annuity |
| | | | Trust, properties are sold through the trust |
| How a Private Annuity Trust Works | | | | and capital gains on real estate are |
| | | | deferred. You can use your lifetime income |
| When an individual sells a property, he or | | | | stream to fund your retirement, invest in |
| she is responsible for paying the capital | | | | another property on your own timeline, or use |
| gains tax on the sale within a number of | | | | them any other way that you see fit, all |
| months. However, the rules are different for | | | | while Trust assets have the opportunity to |
| a Private Annuity Trust. | | | | grow, are protected from creditors and |
| | | | lawsuit judgements, and taxes are deferred. |
| By transferring title of your property into a | | | | |
| Private Annuity Trust, and having the Private | | | | If you've spent your valuable time |
| Annuity Trust sell the property to the new | | | | researching investments, fixing up |
| buyer, you receive a contract that will pay | | | | properties, and managing the stress of the |
| you lifetime income and are thus able to | | | | real estate game, you certainly don't want to |
| defer up to 100% of your large capital gain | | | | lose almost a third of your profits to the |
| over your entire lifetime. | | | | federal and state government. You've most |
| | | | likely planned your future, your goals, and |
| Through the trust, the capital gains tax is | | | | your dreams around the money you thought |
| deferred until the time that payments are | | | | you'd have when you sold your properties and |
| made to you. Because the Trust issues a | | | | losing a chunk of it can be depressing, to |
| regular stream of payments over your entire | | | | say the least. |
| lifetime, the taxes owed are also divvied up | | | | |
| and paid in small increments over time. | | | | If you've been putting off selling your |
| Additionally, the money in the trust is | | | | assets in an effort to avoid paying capital |
| invested in a conservative, diversified | | | | gains on property tax, you owe it to yourself |
| portfolio until the moment it is paid out. | | | | to talk to a professional about a Private |
| | | | Annuity Trust and see how this strategy may |
| How is the Private Annuity Trust Different | | | | work with your particular situation. |