All Forum Posts by: Jeffrey S. Breglio

Your question has been well answered. As long as the value of the estate is under the statutory exemption limit (about 5.5M for a single person and 11M for a married couple), then the estate passes tax free upon death, and as said with the step up in basis.

Whether the property is held in a trust or not will not make a difference as to the tax liability. A trust will, however, facilitate the ownership transfer by avoiding probate, which depending on the state you're in, the value of the estate and a few other things can be a short or very long process and expensive. So, making sure the property is in the trust can make for an immediate transfer upon the death of the owner to the beneficiary. And a trust can be much cheaper to set up than probate as well. Anyone with real estate holdings or businesses, should have an estate plan with a  trust established.

Happy investing!

Jeff

You should also be aware that there are two methods to use your 401K money in real estate investing. One is to place the money with a self-directed custodian, like an IRA. You then direct the custodian to make investments. There are custodian fees and transactions fees.

The second is to set up a 401K trust plan, sometimes called a Solo 401K Trust or an Owner's 401K Trust plan. Here you set up a trust and open a bank account in the trust's name, then move your money to that bank account. There is a plan creation fee up front, but there is no custodian, no custodian fees and no transaction fees to make investments.

Make sure you do your research into costs of these different ways. Almost always the trust route is less costly, more efficient and quicker to get stuff done. 

I consult regularly with my clients on the use of the 401K and IRA funds in real estate. Always happy to chat with an investor.

Happy investing,

Jeff

@Courtney McCoy, actually you can file the s-election at any time, months or years after you establish the LLC. The 2.5 months is a backdating deadline. So you can start with the LLC and file the s-election when income merits the savings. The "rule of thumb" is net business income of around $25-30K, although there are savings with less than that.

Jeff

Mosts stuff you find online is not that great, honestly. Check with a lawyer, local investor or REIA. Most state Divisions of Real Estate also have their standard forms that agents use. You also need to understand the contracts you are using. If you are wholesaling, you need to check local licensing rules as well to make sure you're not violating anything with that.

Jeff

@Ralph Perea, give me a call at the office. I've considered investing in Costa Rica as I've traveled there. So I'm intrigued by that. But more importantly, I'm going to Panama in February to scuba dive. I'd love some recommendations!!

Jeff

Start by attending the local REIAs. There are a number of them and they are really well run. There's Salt Lake REIA, Utah REIA, Utah Valley REIA and Norther Utah REIA.. Google them and start attending as much as you can. Very inexpensive education and great networking opportunities. You'll meet other investors, loan officers, bank representatives and plenty of other real estate professionals to help out and answer questions.

Also remember, there is a lot you can do with little or no money. And private money is an option as well. Leverage is great, but can be a two edged sword. Education is first step! Come join us!

Jeff

Start by coming to some of the local REIAs in Utah. They are fantastic. You can google Salt Lake REIA, Utah REIA, Utah Valley REIA and Northern Utah REIA. All have monthly meetings and some have multiple luncheons. They are a great source of education and networking opportunities, a variety of speakers on a variety of topics. Then take some time talking to other professionals to build your team: property managers, wholesalers, CPAs, attorneys, agents, contractors, etc. The more you learn, the better off you'll be!

I also work in DC (I grew up there). I'm not as familiar with the market in DC but starting to make good contacts. Feel free to contact me.

Jeff

Start by coming to some of the local REIAs. They are fantastic. You can google Salt Lake REIA, Utah REIA, Utah Valley REIA and Northern Utah REIA. All have monthly meetings and some have multiple luncheons. They are a great source of education and networking opportunities, a variety of speakers on a variety of topics. Then take some time talking to other professionals to build your team: property managers, wholesalers, CPAs, attorneys, agents, contractors, etc. The more you learn, the better off you'll be!

Jeff

Lots of info above. so let me summarize for everyone.

NEVER, never, never hold a long term asset--a rental property--in a corporation (Inc.) or an LLC that has been "s" or "c" elected.

Taking a rental OUT of one of the above IS a taxable event. How much depends on things already discussed above.

We (almost) never use the corporation (Inc.) entity for our real estate clients. The LLC is a simpler entity structure to maintain, and can provide better asset protection.

1) For RE agents (commissions), contractors, flipping, wholesaling, birddogging, etc., we set up an LLC and do an "s" election on it (telling the IRS to tax the LLC "like" an s-corporation). This is a tax savings entity because the income from those things is taxed at ordinary income tax rates. Don't put a rental into this!

2) For rental properties, we set up an LLC, a combination of LLCs and partnerships, and/or a series LLC, depending on the number of assets, value and advanced asset protection we are looking for. These are asset protection entities!

1) and 2) are different types of entities with different tax classifications because they are used for different purposes! Please consult an attorney, and CPA, knowledgable in real estate investing and understands the different income streams and asset protection.

Never hold investments properties (rentals or flips) in your personal name.

Many clients hold "title" in the name of a "land" trust for privacy purposes. There is no asset protection value. Just privacy. And this is NOT your "family living" trust. Our recommendation is NEVER put business assets (or the LLCs that hold them) into your family living trust. Many estate planning attorneys will recommend this when they set up your family trust, and you will lose much of your asset protection. Use transfer on death agreements on your business entities for estate planning purposes and to avoid probate of your businesses. If your attorney doesn't know what those are, find another attorney. Yes, you can put your personal residence into your family trust. That we do all the time.

The beneficiary of the "land" trust is their LLC. This provides the protection.

Whether title is held in the name of the trust itself, or the trustee of the trust, depends on the state. In states where it's the name of the trustee, you'll need to find someone to be the trustee if you want the privacy. This can be a pain. Utah is like this, and my clients actually hire my office to be the trustee. Lawyers often do this.

I have hours and hours of free video education on this on my website. Grab a glass of wine and enjoy. :)

Happy investing!

Jeff

@Ken Van Haitsma Jr. Check out my website for the education. It'll really help. I'm also happy to spend a few minutes chatting with you. :)

Jeff