Transfering assets to kids

[Steve Smith]

Anyone active in transferring assets to their kids? Looking for creative idea to give them a few more dollars before I croak. I already give them the non taxable limit, but am giving them options on property, leases and notes where they can get more in the future, and working with others so they get more into their Roths with options.

Other ideas?

[Henry Clark]

Describe your type of assets.  Don't need to know amounts, you can adjust to actual.  Also describe your kids.  Age, what they do, where they live compared to you, do they have kids, are they working or going to college, are they in the military, do they have businesses, the more you supply, the more ideas.  The following are some examples.  

Not your tax person, not giving financial advice, just examples, cover with your tax person.

1.  Buy their house from them and rent back to them.  Great terms, no down, long amort, stepped up basis later.  Loan gets cancelled.

2.  Generation skip

3.  College fund for Grandkids

4. If they are a dentist, chiropractor, electrician, baker, hair salon or anything that requires a building, buy and sell or lease to them. Don't do NNN, you pick up the charges, generous rental and loan terms. When you die they inherit and stepped up. In the meantime low cash outlay for them. Do a 0% down loan at 3% interest with no Balloon on a 35 year amort. Work the angles, although generous, make similar to 3rd party. Loan gets cancelled.

5.  Pay for their College and deduct??????  How do you do that?  Do they work for you????  Benefit???  Do they have a car???  Pay them advertising for signage on their car enough to pay for college.  Do you do commercials, have a website, advertising medium?  Pay them to be your spokesperson.  Etc.  Work the angles. If they have kids, have them be your spokesperson, they will have lower tax rates.

6.  Are you gifting to the grand kids?  Help pay for their high school car.  College.  etc.  This will reduce your kids' costs.

7. Do an LLC with each or all of them. Adapt the Operating agreement to a degree. You put all of the money in. They manage the asset. Ownership and revenue split don't have to be 100% your way, 50/50 or whatever split with your kids depending on how many they are. Ownership transfers.

8.  Not a financial suggestion.  Whether there are 2/3 or 4 kids.  Do not put them into the same asset and jointly manage.  Bad, Bad blood down the road.  Do not care about the concept of "EQUAL".

9.  Primary Residence, $0 capital gain tax per kid or spouse up to $250,000 each or $500,000 total.  Sell them a house that will escalate in Value.  Every two years have them sale and move.  If it fits their lifestyle.  They either pay off the loan, or it gets cancelled.

10.  If you want to move a lot of money and value FAST to them do Self Storage.  A.  Build a large location in a great location.  $1mm to $3mm Value increase in 2 years, which they can capture if they sale.  Loan them the money, with $0 down and interest only, 7-year balloon, on a 30-year amortization.  B. Or they can keep, and the cash flow will significantly higher than than the P/I payment.  C.  They can build an inexpensive Manager's living quarters and live there, saving on buying a residence.  It will be nice.  Marble countertops, fireplace, jacuzzi, tile floors, etc.  Loan gets cancelled.

11.  etc etc,  get creative.

12.  Can't really use 1031's since your related.

13. Pick two high end overseas tourist destinations. Get ready to move fast. When the next Covid world shutdown, or stock market crash, or China and the US stop Trade and there are shortages, or if the Panama canal goes dry in a year, etc etc. Those events will hit US overseas investors and they will want to sale their hobby resort houses on the beach as fast as possible. No STR rentals since everyone is saving money. Buy then at 60% of value. Then sale to your kids. The values will turn around within 1 or 2 years. Pick prime properties though. Loan will get cancelled. Asset will transfer.

Without knowing the type of assets you have and your family's situation, you really can't get too wild.  Example is one of them a Painter?  Buy a painting.  For a lot.  Don't commission the Painting.  Have the painting be more than a year old.

Above, I did not want to keep putting "at Death" at the end of each suggestion. Key is to help them reduce their costs, transfer wealth, put them into abnormally fast value increasing assets, transfer assets at stepped up basis at death, cancel Loans to them- which are assets- at death.

Talk with your Tax person.  They might not come up with the idea, but they can vet it.

If you want to get really wild and larger sums, I would source precious gems and Teak plantations.