For the past years, investors of real estate have been very profitable. However, the market is changing and it may be time for a lot of investors to be on the lookout for latest strategy. For those who own rentals, the greatest trend was to purchase a rental property and see it in order to appreciate it and then buy another rental property through a 1031 tax-deferred exchange system to eliminate the existing capital gains tax. However there are not as many solid investment properties accessible in the real estate market. The sharp increase in real estate prices hasn’t remained in balance with rental income. If you are thinking about selling your investment properties now, you probably are concerned about the massive tax bill you will face.
Low net rent income, demanding tenants, and a large amount of equity at risk have caused almost all real estate owners to consider selling their real estate. But there are countless investors who feel they are “stuck” with property right now that they’d rather sell. Many are hesitant to reinvest in a new 1031 exchange property because of low rental rates, but are unwilling to cash out on the property out of fear of paying substantial capital gains taxes. The good news is that for many owners and investors, it is important to understand that a Private Annuity Trust offers a way to defer paying capital gains taxes, create a lifetime income and protect your assets as well.
With the Private Annuity Trust, real estate investors have a safe and legal way to exit from the labor of property management, the aggravation of dealing with tenants, and the anxiety of wondering how property values will fare in the current real estate market.Instead investors can avoid making hasty decisions, feel out the market, and decide whether or not they even want to stay in real estate.
When the property is ultimately sold, the Trust can begin providing a lifetime stream of income, with taxes deferred over the seller’s lifetime. The Trust assets are protected from lawsuits, and creditors, and the assets in the Trust can eventually pass to the seller’s beneficiaries without worry about the present prevailing 46% estate tax rate. At the same time, they don’t want to fork over up to 30% of their investment profits in the form of capital gains tax payments if they don’t find a suitable investment in time.
If no money is paid from the trust, taxes are further deferred until the payments actually are received and the money can sit and accumulate interest until the seller needs the income. If you began investing in real estate because of the freedom to earn on your own terms, you may be wondering why you now feel stymied by tax codes, volatile markets, and aggravating property management responsibilities.