Real estate makes
a great gift! While it may be difficult to find just the right present for cherished family members or dear friends, consider the option of gifting real property this holiday season. There are many reasons real estate makes a perfect gift, whether it’s your
wish to provide the security and comfort of home to a loved one or you are fulfilling a family tradition by passing down a property. Estate taxes are easily avoidable with proper planning, which has led to it being referred to as the voluntary tax. We will
outline below how to gift New Jersey real estate to your loved ones this holiday season!
Bear in mind that property transferred without any form of compensation in return will be valued at the original purchase price and
when sold, capital gains that will be paid by the giftee are calculated from that number. It is extremely important to know the limits on gifting assets under the current federal tax guidelines for both lifetime exemptions and annual exclusions when planning
to gift New Jersey real estate to your loved ones this holiday season. With an outright transfer of ownership, be aware that should death occur within three years of any transfer of property, the property would be subject to estate taxes. Additionally, gifting
of this type could affect your Medicare eligibility, if it is within 5 years of your application. Be certain you take the time to plan ahead. Ask questions until you fully understand all of the implications of any decision you make in gifting property. This
affects both your own taxes and those of your beneficiaries.
Consider Joint Ownership
Another choice allowing you to gift New Jersey
real estate to your loved ones this holiday season is through
joint ownership. By retitling property that was in your name only and adding your recipient, this creates a joint tenancy with rights of survivorship, meaning you have made a gift. This is a very complicated transaction however, by careful arrangements in
advance probate can be avoided, saving time. Additionally, you’ll be saving your heirs money. However, if there is more than one heir, this can become an extremely complicated process. This may also lead to uncomfortable situations, with all parties having
to come to an agreement to sell any or all of the shares in the property. Likewise, the property becomes subject to any creditors of any of the parties with ownership. Should you still reside in the property, you may wish to consider alternative options for
gifting the property, in order to avoid any unpleasantries among family members.
Open a Corporation
Owning real estate as a Limited Liability Company, or LLC is another way to gift New Jersey
real estate to your loved ones this holiday season. This protects
your assets, allowing them to be passed on in their entirety after your death. LLC allows for a step-up basis at the time of death, meaning the beneficiary will receive no capital gains tax upon the sale of the property. In this most preferred method of ownership,
you can take control of what happens to your estate. You can help your giftee avoid taxes by preplanning carefully. When setting out to pass down real estate through a corporation, you must be absolutely certain to create a business succession plan or an agreement
between any partners, otherwise, the property will be subject to probate for distribution.
Utilize a Trust
Leaving the property as an inheritance is another method that will allow you to gift New Jersey real estate to your loved ones this
holiday season. By creating a simple trust and titling the property in the name of the trust, you can avoid probate, by naming your recipients as trust beneficiaries. One advantage in conveying property through a revocable trust is that the recipient will
not incur the capital gains taxes, as the property is valued at the time of inheritance, rather than the value at the time of the original purchase. Additionally, it provides a period of protection during which the property is overseen by a trustee, responsible
for the protection or distribution of the assets as outlined in the will. There are also generation-skipping trusts, should you wish to will the property directly to a grandchild, when properly executed this helps to avoid taxation upon the death of your children.
These are but a few of the many ways to gift New Jersey real estate to your loved ones this holiday season. At The Cardwell Thaxton
Group we are here to help you understand the advantages and disadvantages of each option. We stop and take the time to listen, gaining a thorough understanding of your unique circumstances. Our goal is to help you fulfill your wishes. The Cardwell Thaxton
Group is here to assist you with any questions you may have on giving such a thoughtful gift. Send us a message or
call (908) 456-1593 today.
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