1031 Exchange Estate Planning

Tuesday, April 07, 2015

Both 1031 exchanges and estate planning are about minimizing tax. 1031 exchanges allow real estate investors to hold onto their capital gains, deferring the income tax. This 'tax deferral' compounds the growth of investment portfolios. 1031 exchanges can, therefore, compound estate planning problems. Estate planning involves the movement of wealth from one generation to another while minimizing tax liability.

Estate planning tool

A useful strategy for parents to pass their real estate holdings on is to have the real estate deeded into a family partnership or LLC. The parents that have acquired the real estate are able to continue to take income from the property, but their heirs receive the property without estate tax and can continue to 1031 exchange the property and grow a real estate portfolio. In this way, the assets are passed to the next generation at their current value instead the appreciated value at upon the parents' death. This occurs without stripping the parents of their ability to support themselves with current income from the assets.

Please contact us with your 1031 exchange and estate planning questions.