January 25, 2013 /24-7PressRelease/
-- House-swapping and lifetime gifts as money-saving options
In this difficult economic landscape, most families are trying to find ways to save costs in major areas of expenditures such as buying a house or estate taxes. Two possible solutions are house-swapping among family members to avoid realtor's fees and using life-time gifts to children as a means of avoiding overly burdensome estate taxes.
House swaps are when family members buy each other's homes in order to meet changing needs and to avoid realtors' commissions and other fees. For example, an older Chicago couple who was looking to downsize while their daughter and her family were looking for a home with more space, swapped their spacious house for the daughter's condo.
The older couple got the no-maintenance lifestyle of condominium living within a short distance to a lively downtown district while the daughter's family was able to move into a large house with a yard that better suited their needs. Buying each other's properties also ensured that the older couple's beloved home stayed within the family.
There is no hard data on the number of people who are swapping homes, but the National Association of Realtors says the trend is taking off, especially as baby-boomers are getting ready to retire.
However, people considering house-swapping should make sure they are educated about the legal and tax obligations. For example, the IRS looks very closely at home sales between family members due to the potential for fraud. Family members can offer a discount to each other, but they must make sure that the reduced house price is one that is deemed fair in the view of the IRS. In doing so, all parties should carefully appraise their properties and involve a CPA, an attorney and a financial advisor.
Each side, under federal law, can still benefit from a certain amount of tax-free profit from the sales of their primary homes.
Gifts as a way to reduce estate tax burden
The children, not the parents, are the ones saddled with the burden of estate taxes since estate taxes do not vest until a property owner's death. If parents wish to spare their children some of this cost, one option they can pursue is to gift their children money during their lifetimes as part of their estate planning.
Each individual parent can give $14,000 tax free to each donee annually and, thus, take that money out of the estate monies that would be taxed later. Therefore, a couple together can give each child or grandchild a total of $28,000 annually. Parents can also make tax-free gifts by paying directly for a child or grandchild's tuition costs or medical expenses.
When looking at estate planning and other options that will fit your family's specific needs, it is wise to consult an attorney experienced in these matters. An attorney can help you to understand and navigate these processes.
Article provided by Jean Galloway Ball, P.L.C.
Visit us at http://www.uselderlaw.com---
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