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southern MN | When you die, your estate has to total up what it is worth, and pays the estate tax. AFTER that, the kids can decide what they want to do. There is no point in buying for a buck at that point.
What you can do is buy the farm from your parent for $1 while all are still alive.
If you die within 3-5 years, it will be viewed as a gift more or less, and you will be back-tracked for paying medical, old home, and estate/gift taxes.
If everyone lives long enough, the kids will end up with the property for a buck, but they will have no basis in the property, and if/when they sell it will owe capital gains on the _entire_ value of the property. Whereas if you inherit the property, you get a 'free' stepped up basis based on the property value at the time of the parent's death. So capital gains will be based on the value of the land at the time of death. Big big tax there.
Play with those varoius scenerios enough, and you get a headache. In most cases, the govt will end up getting their tax, no matter which way you go.
Good planning can make things work in favor somewhat of those who plan, but the rules change every couple of years so the plan needs to be constantly updated.
We are looking at the real probibility of estate taxes returning in a big way, as well as capital gains rising a lot. Not a good situation for passing a farm along to family. Most loopholes such as you describe have been pretty well shut; you might pass off taxes for a time, but will get you in the end.
--->Paul | |
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Season for greedy American heirs.
