Challenge

An individual wants to buy a second home, but is concerned about the tax implications for his family. He has previously stated he would like to pass the vacation property on to his then college-age children.

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Solution

Arrange for his two adult children to own the house. By making annual gifts to the children, they would pay for the house over time. By not having the home in his name, he would then be able to minimize estate taxes. The future capital gains and built up equity will be removed from the parents’ estate.



Challenge

A client owned a real estate property that was upside down. In addition to wanting to avoid having to bring money to closing, he didn’t want to sell for “less than it was worth.” The property was costing him money annually for taxes, interest and insurance. At the same time, this property was an emotional burden and a source of frustration.

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Solution

We performed a detailed analysis and presented our results in an easy-to-understand visual way. It showed that the property would need to appreciate well beyond expectations over the next several years to break even. Furthermore, it showed that even if the property got back to even, it would still have cost him more to hold the property for that amount of time rather than just selling now. Soon after, the client was able to sell the home and remove a significant expense and source of frustration, having confidence that it was the right decision.

While we are familiar with the tax provisions of the issues presented herein, as financial advisors of Raymond James we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.