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 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 sharp increase in real estate prices hasn’t remained in balance with rental income. If you are thinking about selling your investment properties now, you probably are concerned about the massive tax bill you will face.
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. 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 considerable capital gains taxes. The news today 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.
Prior to 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. 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.