02 Nov Three ways estate planning can help you avoid taxes on real estate
Living trust, among other items, can relieve taxes on real estate
For many families, their home is their biggest investment and, for that very reason, it should be included in your estate plan, along with any other real estate.
It’s important to make a wise decision about how your real estate will be treated in the event of your death. Not only because it minimizes potential conflict between family members, but also because it could reduce the tax burden left to your heirs.
Establish a Living Trust
Tennessee follows a Right of survivorship precedent. This means if you die without an estate plan — i.e., a will or trust — your property automatically goes to your heirs. All of them. So if your widow and son’s relationship sours, the case could end up before the Tennessee Supreme Court.
You can avoid this by designating who gets your real estate in your will or by setting up a living trust.
Setting up a trust allows you to maintain excess to your assets while the actual ownership transfers to the trust, which is managed by a trustee. So ownership of your assets can pass to the beneficiaries of your choice without a need to probate your will or pay taxes.
A living trust is more expensive than a will on the front end, but it can save money in the long term by reducing estate taxes and probate fees as well as protect your assets from creditors, spouses, and irresponsible spending.
Qualified personal residence trust
All kinds of property can be placed in a trust, but for real estate you should consider establishing a qualified personal residence trust. This type of trust allows a person to place your personal residence (or a vacation home) in a trust. It removes the property from your estate and thus probate and avoids federal estate taxes.
Transfer ownership of real estate
Another way to avoid probate and taxes is to simply transfer ownership to your desired heir. Or you could add them to the deed. When you die, the deed will default to their ownership with the need to involve the courts.
For questions regarding estate planning laws, contact the Law Office of Michael Craig and we’ll be glad to assist you.