Ron Stumpf Discusses Estate Planning for Real Estate Owners

estate planning orange county, CA

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President Donald Trump’s tax plan has been placed on the back burner and tax reform for estate tax appears to be a low priority in Washington DC. Estate tax is here to stay and our clients need to plan based upon the current income tax law. A married couple may have assets up to $10,980,000 without owing federal estate tax. It’s important to stay aware of estate tax changes, especially for those attempting to keep their taxable estate below the threshold and avoid the 40% federal estate tax.

Our real estate clients have seen the values of their homes, apartments and commercial projects all rise to levels of all-time highs. If the value of an estate is $25,000,000, one can incur $5,600,000 of estate tax. Since this is a significant tax, our clients need to plan for reduction of the tax or payment of the tax.

When the estate is $8,000,000 or less you are far below the $10,980,000 threshold for estate tax. Once an estate rises above $8,000,000, our clients should consider estate tax planning. An easy way to solve estate tax is life insurance. If you choose to take this approach, consider a separate trust to hold the insurance policy. The life insurance policy needs to be a permanent policy. You need to be aware about your premiums today and when you are at an older age. Life insurance policies will increase in premiums as you become older. You should determine the premium rates to age 100. Remember, you will need to hold this policy for the long term.

The next level of estate planning is shifting assets out of your estate. As you buy new properties, you should include your children in the ownership. As your properties increase in value, you may want to refinance your existing properties and use the proceeds to buy new real estate with your children. You could loan your children funds at a very low rate today and have them reinvest the funds into the new project. This will be a family owned real estate partnership. The partnership is usually owned at least 51% by the parents with the children owning 49% or less. This structure provides parents with control over the entity. ELLS can help you structure the transaction to meet your needs and to reduce your estate tax.

Make sure you contact your ELLS Advisor today for more information.

About 

Ron joined the ELLS team in 1977 and became an officer and a shareholder in 1983.

Ron’s area of expertise includes audits, reviews and compilations, mergers & acquisitions. His savvy business sense partnered with his knowledge of government regulations and tax law make him the perfect match for entrepreneurs and business owners.

Ron specializes in real estate tax strategies and founded our Cost Segregation department in 2005. Ron specializes in serving real estate investors and developers. For these clients, Ron structures 1031 exchanges, strategizes tax planning, advises on entity selection and business selection and facilitates buy/ sell agreements. He is an expert in lease buy analysis, cash flow management, strategic planning and debt restructuring.

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