How to will your real estate and avoid taxes.

[David Decker]

My friend came to me with a question? 

He asked - how can I (will) my portfolio of multi family and strip mall commercial real estate to my family, without them having to pay any tax or is the even possible? 

I wasn't exactly sure so I wanted to ask you all for some answers? 

should he put his portfolio in into a trust? Then form an LLC holding company and place each property into it's own LLC for asset protection, under the holding LLC?

This way his Trust can be the member of his holding Wyoming LLC ?

Or is there more? 

(Cost is no issue for formations) 

[Ashish Acharya]

@David Decker, the exemption is more than 11 M per person stating 2018. so more than 22M until 2025 per couple. I will go down after that but might increase based on tax law changes. 

There are few ways to do it. 

1) if the networth (gross estate) at death is less than 22M, the couple will not owe any transfer estate taxes ( aka transfer tax) and the Children will get a step up basis, thus will owe no taxes if they sell the property right away after inheriting it because sale price and basis will be same. 

Remember, if the networth is more than 22M, the estate tax has to be paid, and it is 40% max of everything above 22M. 

2) couple can chose to gift the properties to children without incurring a gift tax up to 22M, however the children will not get step up basis, thus when they sell it, they will realize a huge gain if the RE has appreciated. Parents basis will be children’s basis. 

The best way to transfer property is to inherit it if that’s is an option.

If networth is more than 22M, estate planning needs to be done to minimize estate tax at the end.

If the goal is not to go probate because your state has high probate fees, the assets need to be either titled as joint ownership with survival clause or needs to be in the trust.  The Will will not avoid probate.