How to Reduce Or Eliminate Your Estate Tax

I bet you probably didn’t know that your heirs might have to liquidate ( sell off ) your home or commercial/residential rental properties immediately after your death. This is unless you create an Irrevocable Life Insurance Trust or ILIT.

Most people have the expectation of passing on their wealth to their children or spouse. With the demise of the baby boom generation approaching there will be an enormous transfer of wealth, the government plans to capture some of that wealth with the estate tax. The estate tax is imposed upon death.

As of now if your assets net worth is less than $1.5 million dollars your exempt from the Federal estate tax. For married couples, their exempt up to $3 million dollars. Unfortunately, any amount over the exemption will be taxed under the Federal Estate Tax, which is usually around 45%. This tax must be paid within nine months of the day of your death.

Since few estates hold enough cash to pay for the estate tax, you will be forced to start selling off assets to raise enough money to pay the estate tax on time. The time restraints can sometimes cause people to rush into unfavorable transactions.

Fortunately though, you can use an Irrevocable Life Insurance Trust ( ILIT ) to reduce or eliminate your estate tax cost. ILIT’s can be used to generate enormous amounts of cash for your heirs, which you can use to pay the estate tax. When you purchase an ILIT the proceeds are not included in the estate of the insured. The proceeds are strictly for the decedent’s beneficiary, which completely avoids the estate tax. You get 100% of the money estate tax free.

Any ordinary life insurance policy is not the same as an Irrevocable Life Insurance Trust. An ILIT is estate tax free; a life insurance policy is taxed. This is because a life insurance policy is under the insured’s estate.

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How to Lease Residential Property for Profit

Basically there are two ways to make money off your real estate investment. You can sell it at a higher price, or rent/lease it out.

Finding possible buyers is not much different than finding possible tenants for your residential property. You can place ads at apartment complexes, shopping centers, and the local newspaper. Then you can hold open houses, arrange appointments to view the property, and negotiate terms.

The most obvious benefit of renting out your residential property is that you earn money while still holding ownership over the property. Although it may sound great there can be problems. You could possibly get a bad tenant that skips payments or damages the property during his/her stay. Of course you have the authority to kick them out but the damage has already been done. You now have to deal with the costs of repairing the property, losing out on the earnings that would have been earned while you find another tenant, and the devaluing of your property because of the damage.

To avoid bad tenants you need to screen them by asking them to fill out a rental application form. You should ask for all the information necessary to do a background check, evaluate their ability to pay, and you can ask for information that could be used to track them down incase they damage your property and skip town.

After you’ve found your best candidate, you will need to legally protect yourself (and your tenant) with a Residential Lease. A Residential Lease is a form that lays out any terms and obligations you provide to the tenant or that you want your tenant to follow. Any policy(’s) you have on things like rules on damages and repairs or your policy on subletting should be included in your Residential Lease.

The Residential Lease legally protects you from any squabbles that often occur between tenants and landlords. What if their pet ruins the carpet? What if your tenant damages the wall(s)? What if your tenant misses a payment? What if your tenant abandons the property? It’s best to clear these questions up immediately in your Residential Lease than argue about them later and not be able to do anything legally about them.

Having a Residential Lease will legally protect you and your property. The benefits of having one is obvious and the consequences of not having a Residential Lease are alarming.

“How to Lease Residential Property for Profit” has been brought to you by LegalFormsBank.Biz, where you can download legal forms online. Download your state’s Residential Lease Agreement today. We also have many other legal forms like your state’s Promissory Note Form.