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Planning for Real Estate with Estate
Planning
Written by: Nicole Soltau
One of the most important considerations you will need to make in
regards to your real estate holdings and your estate includes tax
planning. If not handled properly, your estate could end up getting
hit with significant losses due to taxes after your demise. To
protect yourself and your estate against this possibility, it’s
important to plan for your real estate with estate planning.
First, it’s important to understand exactly what estate planning is
and what it is not. Estate planning goes far beyond the simple
drafting of a will. In essence, an estate is the total property,
both real and personal, that is owned by an individual prior to
distribution through a trust or a will. The act of planning your
estate involves distribution of the real and personal property to
your heirs, taking into consideration all the applicable laws,
regulations and possible tax considerations.
The goal of estate planning is to preserve the most amount of your
wealth possible for the intended beneficiaries; prior to your death.
Due consideration of this must be entered into in order to avoid
penalties related to certain Federal and State tax laws. Otherwise
the property and wealth that you struggled to earn and obtain during
your lifetime could easily be lost to the ravages of poor estate
planning after your death instead of benefiting your heirs as you
intended.
Wills and trusts are two instruments which are commonly used in
estate planning. They have different purposes and very different
outcomes, however. Wills are subject to probate court and if they
are contested; the result can be a length and costly legal battle.
In some cases, the majority of an estate has been whittled away the
costs associated with a contested will. It is possible in some
situations to avoid probate through the use of a trust and therefore
avoid the risk of a long drawn out and expensive legal battle. A
trust is used when property is held by one or more persons for the
benefit of one or more other persons known as beneficiaries. The
holder may be a separate trustee or a beneficiary. A trust is
commonly used when there are minor children as heirs; although it
could be used for other purposes. Other considerations to avoid
possible negative tax impacts on you real estate include lifetime
gifts and gifts made while you are still alive.
In some cases you may find that charitable gift contributions are a
good way to go because you can take advantage of immediate tax
savings as well as future tax savings. Under some circumstances you
may be able to avoid the capital gains tax you would accrue if you
sold a property as well as take an income tax charitable deduction
for the property’s full market value when you use it to make an
outright gift. Since the property will be removed from you estate,
this will also provide future tax savings. Some individuals also
choose to plan for their real estate by generating income through a
charitable remainder in order to receive income either for life or
during a specified term of years.
If you own real estate it is critical that you take care of it with
carefully crafted estate planning early on. This can help you to
anticipate economic changes without being hit with severe economic
impacts later on.
About the Author
Nicole Soltau
is the President and Founder of CreditUnionRate.com.
Visit Nicole's
website at
http://www.creditunionrate.com. |
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