For the past years, investors of real estate have been very profitable. But the market is changing and it may be the perfect time for investors to be on the lookout for the 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 today. The increase in the prices are real estate has not remained in balance together with the rental income. If you are thinking about selling your investment properties, you probably are very much concerned about the large tax bill you will face at the end of the day.
Low rent income, demanding the leases and a considerable amount of equity at risk have caused almost all the owners of the real estate to consider selling their real estate. But there are countless investors who feel they are “stuck” with property right now that they’d rather sell. 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, real estate investors have a safe and legal way to exit from the labor of property management, the aggravations in dealing with most of the tenants, and the anxiety of wondering how property values will fare in the present real estate market.Instead investors can avoid making hasty decisions, feel out the market, and decide whether or not they even want to stay in real estate.
When the property is ultimately sold, the Trust can begin providing a lifetime stream of income, with taxes deferred over the seller’s lifetime. The Trust assets are protected from lawsuits, and creditors, and the assets in the Trust can eventually pass to the seller’s beneficiaries without worry about the present prevailing 46% estate tax rate. At the same time, they don’t want to fork over up to 30% of their investment profits in the form of capital gains tax payments if they don’t find a suitable investment in time.
Payments from the trust don’t need to begin right away-not until age seventy. 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.