How Cost Segregation Can Benefit Your Estate Plan

[Julio Gonzalez]

Many of us are familiar with cost segregation studies and how they benefit real estate property owners. But have you ever considered how beneficial they can be as a tax strategy for estate planning? Cost segregation reduces the taxable value of your estate which has a direct impact on estate planning. When someone passes away, the assets within their estate are subject to estate taxes if the total value of their estate exceeds a certain threshold (this amount fluctuates based on tax code, so be sure to consult a professional).

What are the benefits?

Deferred Taxes and Tax Reduction

Cost segregation studies can reduce taxable income for property owners both during their lifetime and within their estate. The tax deferral from a cost segregation study is a very powerful and strategic tool to utilize in a wealth management plan for your estate.

Enhancement of Property Value

Real estate property that has had a cost segregation study performed on it is more appealing to buyers and investors as there is potential for a continuation of tax savings. Also, since a cost segregation study increases your cash flow, you can reinvest that cash flow into your property to make improvements which therefore increases the value.

Improve Liquidity for Estate Planning

The accelerated depreciation created through a cost segregation study reduces your taxable income which means you are paying less in taxes and get to keep more cash in the bank. Liquidity in an estate is crucial in order to pay expensive estate taxes without having to sell off assets within the estate.

Estate Strategy Flexibility

A cost segregation study allows you to make strategic decisions about a property and is very helpful with property disposition (ex. If you need to replace the roof). It allows you to optimize tax benefits as well as explore other reinvestment strategies throughout the lifespan of the property.

Both cost segregation studies and estate planning are very complex strategies. As always, I recommend discussing this with professionals in order to ensure it is implemented correctly.

Have you considered cost segregation studies for your estate plan?