What is Estate Planning?

Estate planning is the process, undertaken before your death, of ensuring that your money and property are given away as you would like. Without estate planning, you have no say in who inherits your money, your family may have to pay taxes, and probate could be more complicated and time-consuming than is necessary. The most common tools used in estate planning are wills, trusts, powers of attorney, and living wills. Other specialized tools may be used to avoid probate.

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Here are the basics of a 1031

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I have been working on 1031 exchanges for many years. Here are the basics of a 1031-

The key advantage of a Section 1031 exchange is the ability to sell a property without paying any capital gain tax, or depreciation recapture at closing, which allows the earning power of the deferred taxes to work for the benefit of the investor.

Although Section 1031 refers to “an exchange of property”, it does not require a simultaneous “swap” of properties. A Qualified Intermediary “QI” is an entity who enters into a written agreement with the taxpayer (“exchanger”) to acquire the exchanger’s rights and/or ownership interest in the property the exchanger is selling (“relinquished property”), and transfer such ownership interest into one or more properties of “like-kind” that the exchanger chooses to buy (“replacement property”). A QI is required by tax law and provides a safe harbor for the taxpayer (exchanger). I use Custom 1031 in Spokane as the QI for almost all 1031 exchanges that go through my office.

In other words, the intermediary is “assigned in” as the seller of the property during the closing process. It is the assignment that allows the seller to become an exchanger and, essentially convert an otherwise taxable sale and subsequent purchase of investment real estate into a tax-deferred exchange.

Because the intermediary is technically the seller who receives the sale proceeds, it prevents the exchanger from being in “actual or constructive receipt” of the proceeds; thus, there is nothing to tax.

Honesty

Your counsel can only prepare for any circumstance if he/she knows all of the facts. Normally, surprises are going to harm your case not help it. Your attorney is there to assist you, so divulge all information pertaining to the situation. Your attorney may ask you questions that you do not think are relevant or that you might think are personal, but remember, they are there to ensure that you have the best outcome.

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Act in a timely Fashion

gg61049176If you find yourself in a sticky situation, whether you need legal counsel or just advice, the sooner you seek help the better off you will be. The longer you wait the longer the opposing counsel has to build a case against you or maybe just for some documents to get lost. Typically, your counsel will need time to review the case.

Estate Planning

Estate planning is for everyone. While most people do not like to think about death, it is a reality and typically unplanned. It is a lot easier on everyone, especially if you have a spouse, children and/or any relatives, if you draw up your own will and testament. I have been posted lots of information on estate planning, they should answer most of your questions. When you are ready to plan your estate give me a call and we will get started.

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Remember, Honest is the best Policy

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Remember, honest is the best policy and your counsel can only prepare for any circumstance if she knows all of the facts. Normally, surprises are going to harm your case not help it. Your attorney is there to assist you, so divulge all information pertaining to the situation. Your attorney may ask you questions that you do not think are relevant or that you might think are personal, but remember, they are there to ensure that you have the best outcome.

 

Final 1031 exchanges Post

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The 3-Property Rule – You can identify up to three potential replacement properties without regard to fair market values of the properties.

The 200 Percent Rule – You may identify any number of properties as long as their fair market value does not exceed 200 percent of the total fair market value of all Relinquished Property (ies).

Section 1031 requires that you purchase one or more new properties by the 180th day after the closing of the old property. You must purchase one or more properties on your 45-day identification list.

This is a very simplistic break-down of 1031 exchanges, but will help you to understand the basics and to understand if a 1031 is right for you.

Basics of a 1031 Continued

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To meet the requirements of §1031, both Relinquished Property and Replacement Property must qualify. In other words, both the property you are selling and the property you are buying must be qualified property of like-kind. If not, your exchange will fail and be classified as a sale.
The Internal Revenue Code requires that you identify your potential replacement properties within 45 days of the closing on the sale of your relinquished property. The 45 days are calendar days, so if the 45th day is Sunday, Labor Day or the 4th of July, that day is still the deadline for identification of new properties. There are no extensions allowed.
Basics of a 1031 Continued Will Continue tomorrow.

Basics of a 1031

gg61049176
I have been working on 1031 exchanges for many years. Here are the basics of a 1031-

The key advantage of a Section 1031 exchange is the ability to sell a property without paying any capital gain tax, or depreciation recapture at closing, which allows the earning power of the deferred taxes to work for the benefit of the investor.

Although Section 1031 refers to “an exchange of property”, it does not require a simultaneous “swap” of properties. A Qualified Intermediary “QI” is an entity who enters into a written agreement with the taxpayer (“exchanger”) to acquire the exchanger’s rights and/or ownership interest in the property the exchanger is selling (“relinquished property”), and transfer such ownership interest into one or more properties of “like-kind” that the exchanger chooses to buy (“replacement property”). A QI is required by tax law and provides a safe harbor for the taxpayer (exchanger). I use Custom 1031 in Spokane as the QI for almost all 1031 exchanges that go through my office.

In other words, the intermediary is “assigned in” as the seller of the property during the closing process. It is the assignment that allows the seller to become an exchanger and, essentially convert an otherwise taxable sale and subsequent purchase of investment real estate into a tax-deferred exchange.

Because the intermediary is technically the seller who receives the sale proceeds, it prevents the exchanger from being in “actual or constructive receipt” of the proceeds; thus, there is nothing to tax.

This Post will be Continued tomorrow.