Real estate investors is very profitable for the past several years. However, the market is changing and it may be time for a lot of investors to be on the lookout for latest strategy. For those who own rentals, the trend was to buy a rental property, see it appreciate, and buy another rental property using a 1031 tax-deferred exchange to eliminate current capital gains taxes on the profits. However there are not as many solid investment properties accessible in the real estate market. The increase in the prices are real estate has not remained in balance together with the rental income. If you’re thinking about selling your investment properties now, you probably are concerned about the large tax bill you’ll face.
Low rent income, demanding tenants and a huge amount of equity at risk have caused all real estate owners in order to consider selling their real estate. However, there are countless investors who feel that they are stuck with the property right and now they would rather sell it. Many are hesitant to reinvest in a new 1031 exchange property because of low rental rates, but are unwilling to cash out on the property out of fear of paying substantial capital gains taxes. The good news is that for many owners and investors, it is important to understand that a Private Annuity Trust offers a way to defer paying capital gains taxes, create a lifetime income and protect your assets as well.
With the Private Annuity Trust, the investors of real estate have a legal and safe way to exit from the labor of property management, the aggravations of dealing with the tenants, and the anxiety of thinking how the property values will have a fare in the existing real estate market.With the Trust, there’s no pressure to reinvest right away to avoid paying capital gains.
Before the sale of the property is final, the property is transferred into the Private Annuity Trust. The Trust assets are protected from creditors and lawsuits, and the assets in the Trust can at the end of the day pass to the seller’s beneficiaries without worrying about the 46% estate tax rate which is the prevailing rate. Many investors are concerned that due to significant property appreciation over the last several years, they are now too heavily invested in real estate.
The current Internal Revenue codes and strategic implementation of Private Annuity Trusts make avoiding this predicament a reality. If you’re ready to take back the reins on your investment vision, talk to a professional today to explore how Private Annuity Trusts may benefit your particular situation.