For the past years, investors of real estate have been very profitable. 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 greatest trend was to purchase a rental property and see it in order to appreciate it and then buy another rental property through a 1031 tax-deferred exchange system to eliminate the existing capital gains tax. 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. However, there are countless investors who feel that they are stuck with the property right and now they would rather sell it. A lot of people are hesitant to reinvest in a new 1031 exchange property due to the fact that its low rental rates, but are unwilling to cash out on the property out of fear of paying considerable 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.With the Trust, there is no pressure to just reinvest immediately 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 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.
If no money is paid from the trust, taxes are further deferred until the payments actually are received and the money can sit and accumulate interest until the seller needs the income. If you began investing in real estate because of the freedom to earn on your own terms, you may be wondering why you now feel stymied by tax codes, volatile markets, and aggravating property management responsibilities.