Wealth Transfer
My dad owns a small strip center worth about $1M free and clear. He's ready to give it to me.
What is the best way to transfer it so that he doesn't get nailed by the IRS?
I was thinking he could put it in a trust and then pass the deed to me that way. What are the implications of this?
Also, I can sell one of my properties and net about $100K. If I do a 1031 exchange with my dad on this, then he can owner finance to make it legit. He'd still let me use the 100K of tax free money for other investments, if we can figure out a way to do it.
My head is spinning with the possibilities but I don't want to do something stupid.
Any advise is appreciated
This is definatly something you should consult a tax advisor about. There are way to many questions here to even attempt to give you a good answer to this question.
If you are going to be given a million dollar property, consider a couple hundred dollars on some professional advise a good investment.
MyFroger got a good point here. You need this to be handled professionalty and if I was you, I would ask for the best in town since they tend to be the cheepest considering the quality... Good luck!
Hello fellow Neapolitan, congrats on your opportunity. Myfrogger is absolutely right, a tax advisor and perhaps an asset protection advisor would be wise investments. Mark Warda has a great book on asset protection and on land trusts in Florida.
Ray Higdon
Thanks for the replies. I absolutely am and always was planning to seek professional counsel.
The reason I put it here in the forum is to see if I could pick up some "creative" ideas before I spoke with an advisor and throw them at him along with my ideas.
Again, any thoughts?
If it has a lot of appreciation it might make sense to inheirit it instead of a purchase or gift. Also depends on what other assets would be in the estate and how much the estate tax would be. Definitely a situation to contact a tax and estate planning attorney. If you do a 1031, watch for the limitations between related parties.
I agree, contact both an asset protection attorney and a good accountant. Try www.rjmintz.com for some good white papers and perhaps advice. Also review www.assetprotectiontheory.com to avoid scams and just plain bad advice.
That said, consider placing the property in a limited partnership. Your father would have the majority (limited) interest in the limited partnership and you would have a smaller interest. Either all at once, or each year, your father would gift you a portion of his interest. Nice feature - IRS allows a reduction in value when property is "encumbered", that is you, as a limited partner, are not free to use or dispose of the property at will. Typical reductions in value are 40% to 50% percent of apprasial, so a gift of $100k appraised would be treated as if it were worth only $50k or $60k for application against the inheritance codes for tax purposes.
Also, you should be able to gift up to 100% of the lifetime inheritance amount tax free (it's over a million right now, but I'm not yet fortunate enought to have to worry about this particular problem, ask). A good accountant can assist.
Last tip, don't do a limited partnership without competent asset protection advice from a lawyer as the general partner interest can be attacked and perhaps encumbered (outside liability). I just posted a long piece dealing with this subject in the law and legal forum. You should strongly consider an entity, not a person, as the general partner. You can still arrange to control the general partner through the entity however.
Good luck and may we all have your problem evenutually.
Thanks for the input Mantis. I'll check out the websites you suggested.
Just today I sat for a half hour freebie with an accountant recommended to me. His primary point was for my dad to put the assets into an newly formed S Corp with us two as 50% share holders. I could then take full control and this supposedly will eliminate any gift taxes, probate, capital gains, etc.
I'm trying to get a little smarter before I sit down with the estate planning attorney.
Good idea baporated; would you please keep us informed about any new "trick & turn" you learn from those experts?