For many people, the holidays are some of the few times a year that the entire family is together. Your family members are more relaxed and not as distracted by everyday obligations. It’s a great time to catch up, make memories, and discuss some important matters like estate planning. While it may feel awkward to initiate this kind of conversation, it is important to discuss what you intend for your estate during a time when adjustments can be made in a good frame of mind.
Summertime is definitely a fun time for everyone. But with the added fun comes dangerous situations. Swimming, hiking and bike riding are just a few of the activities that we love to participate in during the summer, but certainly, there are many more things that we enjoy doing outside in the summertime.
Unfortunately, just one incident is all it takes to turn our world upside down. And when we suffer personal injuries, it can be difficult to recover.
Section 1031 of the Internal Revenue Code allows taxpayers to exchange property held for productive use in a trade or business or for investment (hereinafter referred to as “qualified use”) for like-kind property on a tax-deferred basis. Deferred taxes means more funds to put toward replacement property(ies). You may even be able to afford to buy a replacement property in a desirable vacation area—and may be tempted to convert the property to personal use. A pure vacation home or personal residence will not meet the qualified use requirements, however, the IRS does allow some limited personal use of 1031 exchange property.
Sitting down and having a discussion about what will happen to your assets and finances after you pass away is certainly not an easy thing to do, but it’s something that should be done. You should start your estate planning as early as your graduation from college, and especially once you’re married with children.
When you pass away, most likely your estate will pass through the probate process. This process is the official way your estate is settled through the supervision of probate in California. The estate is frozen until the court determines the Will is valid, all relatives have been notified and that all of the property in the estate is identified. The court will also ensure that creditors and taxes are paid. Once that is all done, an Order is issued by the court for the distribution of the remaining assets. If you die without a will, the court will determine who is appointed as the administrator of the estate and will determine who receives your assets based on a “family tree” of surviving relatives.
Looking to trade in an old investment property for something new? Section 1031 of the Internal Revenue Code allows taxpayers to defer the recognition of gain on business or investment property exchanged for like-kind property. Although this seems simple on its face, below are several common pitfalls.
- Failure to properly use a qualified intermediary (also referred to as an exchange facilitator)
The word “exchange” is applied quite literally in Section 1031. You must exchange the old property directly for the new property, without receipt of any sale proceeds. Because the odds of finding someone who is willing to swap properties is incredibly low, most people must use a qualified intermediary to comply with the “exchange” requirement of Section 1031. The funds from the sale of the relinquished property are paid directly to the qualified intermediary, who uses the funds to acquire the replacement property. The qualified intermediary also handles the exchange of title with the buyer of the relinquished property and the seller of the replacement property. You may need to come up with separate liquid funds or financing if the replacement property is more expensive than the net proceeds from the sale of the relinquished property. Continue reading