No two cases are ever quite the same. Some people I can help, and some people I truly can't. Half the fun is in decided who is who.
Take this case. It was a 67 year old lady, a widower. She does have children and grandchildren, but also has to look out for herself.
She has a primary residence, a rental condo and a second mountain home which has been rented for the last few years.
She has gotten to the point where she can use some extra income, and does not want the hassles of property management.
She purchased the mountain home in 1994 for 200K. It now is worth 790K. She owns it outright. She wants to sell, but found out she would owe 100K in capital gains tax. It's hard to give up that kind of money to Uncle Sam.
After going over her needs and options, the best choice for her will be to split the proceeds between a 1031 exchange into the tenant in common property and a private annuity trust.
Both will provide her a monthly income. She will being taking payments immediately from the PAT, and will slowly deplete that asset over time. The other half, she will also receive an income from (about 2K/mo) and that income will increase over time. She can later do another exchange and continue to increase her income. The TIC will pass to her heirs at the stepped up basis. She can always add that asset to the PAT at a later time, if the situation warranted it.
She is now very diversified, and she has a stable income which allows her to live very comfortably. Part of her assets are removed from her estate, so her heirs will not be faced with large amounts of estate taxes at her passing.
Bottom line, she has that 100K working in her favor for years to come.
Paula Straub
http://www.savegainstax.com
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