Best Way To Transfer Property Upon Death? (REAL LIFE EXAMPLE)
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Best Way To Transfer Property Upon Death? (REAL LIFE EXAMPLE)

– [Toby] Jeff, do you have
anything on a tax side that you want to talk about there? – [Jeff] Well, from my point of view, inheriting the property’s
going to be the best way to go. Especially if it’s appreciated property. – [Toby] Yeah, somebody just responded. It sounds like it’s in Ohio. Actually, I can give you
a great Ohio example, ’cause this is real life. So the parent wanted to
give everything to the kids, and this is when the estate tax exclusion, which is now at $11.2 million,
about to go up, per spouse. This is when it was about $1 million, and everybody’s freaking
out like, oh my goodness. Your estate’s going to be too big and if you get clubbed
with this estate tax. So this attorney setup
a limited partnership and transferred the properties
into this limited partnership and then started giving
the kids an interest in the limited partnership. – [Jeff] Increasing it every year? – [Toby] Increasing the contribution, every year he would gift to them and you can give $15,000
per recipient per year without even going against
your lifetime exclusion. The reason that he did
this was to avoid this tax that ended up being a non-issue. He actually passed and most of this estate would have been much smaller,
but as Jeff just noted, what they gave up was something
called a step-up in basis. So number one, the value
of these properties will be its basis when they die. Which means you want to make
sure that this is transferred via either a will or a living trust, somehow it’s transferred
to the two of you. I’m assuming that there’s no other kids and that you’re the primary
beneficiaries of the estate. But that the easiest route
would be to use a trust, so that you don’t have
to wait for the estate and you don’t have to wait
for the court to do its thing. I’m not familiar with Ohio
off the top of my head, but most states have a cool down period, where they don’t allow
the transfer of assets, especially real estate for many months after somebody passes. And the reason they do that,
is they leave the estate open for creditor claims. You could actually petition the court to perhaps sell the assets, but it would be still part of the estate. And on average, and I can
only give you averages, these estates take somewhere between 18 months and 24 months to complete. That’s an average. Somebody’s always going to say, well if you have no
assets it’s really easy. I’m like, okay, that’s really
easy, that’s on the low end, then there’s the really difficult, where it takes years and years and years, like Prince, where you’re
going to be in court for many years, or Michael Jackson. All these things where they’re big assets, they’re going to take a while,
but the average meaning is 18. Realistically, with real estate, the minimum is about six months, so I would tell your parents
to save time and money, to not give you the asset
before they have passed, but to leave it to you and
to draft a living trust to do the transfer. That would be the simplest. Somebody else may say a paid on death or this, that or the other. That does not address all the issues that could creep up in the meantime. And so, I would caution
against those types of things and I’ll just give you a
couple, this is a tax webinar, but let me just give you
the parade of horribles. Your sister has a creditor
or going through a divorce or has special needs, is older in life and has a whole bunch of medical bills. They would just end up taking the house. So with a living trust,
you can protect that with creditor protection
and special needs provisions automatically in the trust, which if you use a good
estate planning attorney, they’d do that automatically. If you used us for example,
I’d put it in every single document I ever draft. But regardless, you go to
the lawyer and you say, hey, we want to make sure that
these things are protected and kept separate and et cetera. Or if somebody pre-deceases you, it already covers, here’s
who gets it afterwards. We use fun language like per
stirpes and things like that, which means, it’s not a
disease, it’s if you’re passed, it goes to your children,
your portion only. So it makes it really easy,
instead of doing some craziness. Boy, people keep asking
lots of questions, holy cow. We’re going to get to
them, but I can’t help but look at all these questions coming in. And thank you, we’re going to
be here ’til midnight, Jeff. – [Jeff] At least they
keep me here ’til midnight. – [Toby] Alright so, which will be fun. Alright, so anyway, so I hope
that answers that question. From a tax standpoint,
the best thing is to get that step-up in basis when you pass, which means you could
sell those properties and pay zero tax on it. Maybe the transfer tax, that’s it. Okay. (light music)

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