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Today, I am here with Richard Hershey of the Estate Panning Team to discuss the deferred sales trust, and how it can reduce the property gains tax. The deferred sales trust is a legal tax strategy that helps people facing capital gain issues in the sale of their real estate.
When selling a primary residence, you are entitled to a $250,000 exclusion from capital gains as an individual or $500,000 as a couple. In many markets, such as California, it’s not uncommon to face people that have gains in excess of that. If they have $1 million or $2 million of equity in their homes, they are exposed to capital gains taxes when they decide to sell.
The deferred sales trust is a really useful tool for real estate agents. We have worked with many agents who have been successful in bringing properties to the market that otherwise wouldn’t even have been listed. It helps you, the agent, work with someone who is otherwise reluctant to list because of the potential impact of capital gains taxes. If they can be comfortable with this, these are homes that agents can bring to market, sell, and gain commission on. Most of the agents we meet initially have not been exposed to, nor are they familiar with, the transaction. This strategy is a valuable tool to have in your arsenal when competing against other agents.
A deferred sales trust is a fantastic opportunity for those of you in investment real estate. It’s a true, tax-deferred alternative to a 1031 exchange. It allows someone who owns investment real estate to sell that real estate, keep the entire transaction tax-deferred, not require them to purchase a replacement property, a 1031 exchange, or have a 45-day waiting period for identification purposes.
To find out more about deferred sales trust or to contact Richard Hershey directly, click here.
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