Understanding Pennsylvania Commercial Real Estate Tax Appeals

December 15, 2014 by

Upscale Shopping Center

If your Pennsylvania commercial property was built in the last 15 years in Montgomery, Chester or Delaware counties, there is a good chance the value of your property is over-assessed. Before deciding whether to do a real estate tax appeal, you should first speak with a commercial appraiser to do a preliminary analysis using one or more of the three valuation methods.

  1. The Income Approach to value is a method of converting your anticipated monthly rental income into present value by capitalizing net operating income by a market derived capitalization rate. Essentially, a capitalization rate is a rate of return on investment. Capitalization rates are taken from sales of similar investment properties and applied to the net income of the property to determine the market value of your property.

    There are several ways to estimate value using capitalization. The method used depends upon several factors such as the timing and regularity of the cash flows, period of time the investment is held, whether or not long term leases are involved. Direct capitalization is the most widely used and simplest approach to apply because it does not require explicit projections of income and assumes that expectations for future income are similar for all the properties compared. It is used when income is not expected to vary significantly over time. Direct capitalization typically involves an average of several years’ income. The net operating income is then capitalized by an overall capitalization rate to arrive at market value.

  2. The Sales Comparison Approach to value looks at comparable commercial properties that have similar use and square footage that were sold in the area in the last year. This is the same method used in residential tax appeals.

  3. The Cost Approach is typically used for vacant land or property that does not generate income. The cost approach is performed by valuing the land at its highest and best use. The fundamental premise of the cost approach is that a potential user of the property would not pay more for the property than it would cost to build an equivalent property. The value of the land plus the depreciated cost of the improvements should equal the total market value estimate.

    The appraiser would take an average of all methods that apply to arrive at the fair market value and multiply it by the common level ratio to arrive at the correct assessed value. If that correct assessed value is less than the actual assessed value of your property you should contact Gregory J. Spadea at 610-521-0604 or online of Spadea & Associates, LLC. The deadline to file an annual real estate tax appeal is August 1. Keep in mind the appraiser may need four to six weeks to complete an appraisal so you need to contact the appraiser in May or June to meet the August 1, filing deadline.

Filed Under: Estate Planning, Real Estate Tagged With: , , , ,

Five Reasons Why Joint Accounts May Be a Poor Estate Plan

December 5, 2014 by

Writing A Check

Many people view joint ownership of bank or brokerage accounts as an easy and inexpensive way to avoid probate since joint property passes automatically to the joint owner at death. Joint ownership can also be an easy way to plan for incapacity since the joint owner of accounts can pay bills and manage investments if the primary owner gets sick or becomes incapacitated. Although joint accounts make sense for some assets like a primary residence for married couples, there are five drawbacks as well such as:

  1. Creditor Risk. Joint owners of accounts have complete access and the ability to use the funds for their own purposes. In addition, the funds are available to the creditors of all joint owners. If a senior applies for Medicaid or other public benefits half the joint account could be considered as belonging to them as well as the other joint owners.

  2. Inequity Regarding Other Beneficiaries. If a parent has one child on certain accounts, but not all children, at death that one child may end up inheriting more than the others. While the parent may expect that all of the children will share equally, and often they do in such circumstances, there’s no guarantee.

  3. Unexpected Death of Joint Owner. A system based on joint accounts can fail if a child passes away before the parent. Then it may be necessary to set up a trust to manage the funds or they may ultimately pass to the surviving siblings with nothing or only a small portion going to the deceased child’s family. For example, a mother put her house in joint ownership with her son to avoid probate and Medicaid’s estate recovery claim. When the son died unexpectedly, her daughter-in-law was left high and dry despite having devoted the prior four years to caring for her husband’s mother.

  4. Loss of Control. If a parent adds a child to an account making it a joint account, that parent may lose control over the account and decisions may be made without his consent. The problem with that is the child can withdraw all of the money, regardless of their contribution to the account.

  5. Income Tax Considerations. The beneficiaries do not get the full stepped up basis for income tax purposes when they inherit jointly owned real estate. Therefore if they later
    sell the house they will have to pay federal and state income taxes on the capital gain which is 14% to 19% higher than Pennsylvania inheritance taxes.

Joint accounts do work well in two situations. First, if you have only one child and want everything to go to him or her, joint accounts can be a simple way to provide for succession. It has some of the risks described above, but for most people the risks are outweighed by the convenience of joint accounts. Second, if you put one or more children on your primary checking account to allow them pay the recurring monthly bills and have access to funds in the event of incapacity or death. However, for the rest of your assets, wills, trusts and durable powers of attorney are much better planning tools. They do not put your assets at risk. They provide that the estate will be distributed according to your wishes or in the event of a child’s incapacity or death. In addition they provide for asset management in the event you become incapacitated. If you do not have these documents or have any questions please contact Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Filed Under: Estate Planning Tagged With: , ,

Understanding the Difference Between Robbery and Theft

November 26, 2014 by

Man Mugging Woman In Street

Robbery is a theft of money or personal property committed by force or threat of force. The key difference between robbery and theft is the use of some kind of force or the cause of some serious harm in taking the property from someone. The degree of force will determine the severity of the charge. Generally, the crime of robbery constitutes a third degree felony. However, if during the commission of the crime, the accused causes bodily injury to another person, the charge will be a second degree felony. If the accused seriously injures another person or puts them in fear of serious bodily injury, the crime constitutes a first degree felony. Also, if the accused commits a robbery of a motor vehicle while another person was in lawful possession of the vehicle, this is also a first degree felony.

Theft and Robbery are separate offenses and are normally charged together. Theft is taking the property of another without force. Theft from a store such as shoplifting is also called Retail Theft. Both Retail Theft and Theft are graded based on the value of the property stolen and whether the accused has any prior theft convictions. Theft offenses are graded as follows: If the value of the property is $500,000.00 or more, the charge is a first degree felony. If the value of the property is at least $100,000.00 but less than $500,000.00, the charge is a second degree felony. If the value of the property exceeds $2,000.00 but less than $100,000.00, then the theft charge is graded as a third degree felony. If the value of the property was at least $200.00 but equal to or less than $2,000.00, then the theft charge is graded as a first degree misdemeanor. If the value of the property was at least $50.00 but less than $200.00, then the theft charge is a second degree misdemeanor. If the value of the property was less than $50.00, then the theft charge is a third degree misdemeanor. The reason the grading is important is because it determines the number of years of incarceration the accused will serve if found guilty. The maximum penalty for a felony, misdemeanor and summary offenses are as follows:

Felony 1st Degree 20 years in prison
Felony 2nd Degree 10 years in prison
Felony 3rd Degree 7 years in prison
Misdemeanor 1st Degree 5 years in prison
Misdemeanor 2nd Degree 2 years in prison
Misdemeanor 3rd Degree 1 year in prison
Summary Offense 90 days in county jail

There are several defenses to Robbery such as:

  1. No theft was committed. Since robbery is a theft by force, if there is no theft committed, there is no robbery. Examples of actions that may be confused with theft include reclaiming property you own, or taking property that you believed to be your own.
  2. No injury occurred or the victim was not placed in fear of injury. However, in most cases, merely being in fear of injury is sufficient for the prosecution to prove the element of force in a robbery charge.
  3. Intoxication, Entrapment, Duress. These three defenses can be used in many different criminal actions including robbery and theft. All three defenses try to show that a defendant is not guilty, even though the crime was committed.

If you are charged with Robbery or Theft contact Gregory J. Spadea at 610-521-0604, of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Filed Under: Criminal Law Tagged With: , ,

Understanding the Difference Between Simple Assault and Aggravated Assault

November 25, 2014 by

Two men fighting

There are two categories of assault in Pennsylvania: simple assault and aggravated assault. Simple Assault is defined as when the accused attempts to cause or intentionally or recklessly causes bodily injury to another; negligently causes bodily injury to another with a deadly weapon or attempts to put another in fear of eminent serious bodily injury. Simple assault is further classified based on its severity. Simple assault is normally a second degree misdemeanor, unless it is committed during the course of a consensual fight when it is graded as a third degree misdemeanor, or if against a child under the age of twelve by an adult twenty-one years of age or older when it is graded as a first degree misdemeanor.

Aggravated Assault is when the accused attempts to cause or intentionally or recklessly causes serious bodily injury and is graded as a first degree felony. A second degree felony only requires bodily injury. The difference between assault being graded as a first degree felony and second degree felony is the word serious or an extreme indifference to human life. In addition any physical contact with a police or probation officer will always be charged as aggravated assault.

Some common defenses to Assault charges are lack of intent to harm, no bodily injury occurred, self-defense, provocation, insanity or intoxication but the intoxication cannot be voluntary.

While the difference between simple assault and aggravated assault may seem minor there is a dramatic difference in the potential sentences if the accused is found guilty. Especially since Aggravated Assault is either a 1st or 2nd degree felony. The maximum penalty for a felony, misdemeanor and summary offenses are as follows:

Felony 1st Degree 20 years in prison
Felony 2nd Degree 10 years in prison
Felony 3rd Degree 7 years in prison
Misdemeanor 1st Degree 5 years in prison
Misdemeanor 2nd Degree 2 years in prison
Misdemeanor 3rd Degree 1 year in prison
Summary Offense 90 days in county jail

If you are charged with Assault, call Gregory J. Spadea at 610-521-0604, of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Filed Under: Criminal Law Tagged With: ,

12 Tips to Help Landords Audit Proof Their Tax Return

November 18, 2014 by

Tax return paper

The IRS does not audit too many returns due to inadequate staffing and poor management. However, to truly audit proof your return, I would advise you and all my landlord clients to:

  1. Make the election under Treasury Regulation 1.469-9(g) to aggregate all real estate activities as one activity for passive loss rules if you have more than one rental property. This makes meeting the 750 hour rule for all you rental properties much easier than having to meet it for each individual rental property.
  2. Keep a log on Microsoft Outlook or Google Calendars of the work you do as a Landlord to meet the 750 hour test such as:
    1. working or improving the property;
    2. researching and bidding on properties;
    3. finding and screening tenants;
    4. collecting rent;
    5. performing maintenance.
  3. Never use round numbers on your return because it looks like you are estimating your expenses.
  4. If you pay a contractor or any unincorporated person more than $600 during the year you must issue them a 1099. Therefore you should have them fill in a W-9, before you pay them so you will have their information and can prepare a 1099.
  5. Reconcile the mortgage interest and real estate taxes reported on your 1098 to the amount deducted on your return to ensure the numbers match.
  6. Do not deduct capital improvements under repairs but instead depreciate them or use Internal Revenue Code Section 179 to expense them in the tax year they are placed in service.
  7. Use Quickbooks if you have multiple properties to track rental income and expenses for each property. Deposit all your rental income into a separate bank account.
  8. Never deposit rental income into your personal account and never pay personal expenses from your rental account. Transfer money from your rental account to your personal account and then pay personal expenses from your personal account.
  9. Have a separate credit card that you use only for your rental properties and pay the monthly bill from your rental bank account. At the end of the year the credit card company will give you a summary of all your expenses making your record keeping that much easier.
  10. Make sure all your deposits into your rental bank accounts reconcile to the amount of rental income reported on your tax return.
  11. Keep your leases current and make sure the monthly rent that you deposit is the amount listed on the lease.
  12. Keep security deposits in a separate trust account and only disburse those funds when the tenant moves out.

If you have any questions about audit proofing your return or need help preparing your tax return call Gregory J. Spadea at 610-521-0604 or contact him online, of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Filed Under: Audit, Business Law, Tax Law, Tax Return Tagged With: , , , , , , , , , ,

Qualifying for the Family-Owned Business Exemption from Pennsylvania Inheritance Tax

November 10, 2014 by

Beginning July 1, 2013, the transfer at death of certain family owned business interests are exempt from the Pennsylvania inheritance tax. Pennsylvania Inheritance Tax is currently 4.5% for linear descendants, 12% for siblings and 15% for everyone else. To qualify for the family-owned business exemption, a family-owned business interest must:

  1. Have been in existence for five years prior to the decedent’s death;
  2. Have less than 50 full time equivalent employees and a net book value of assets totaling less than $5,000,000 at the date of the decedent’s death;
  3. Be engaged in a trade or business, the principal purpose of which is not the management of investments or income producing assets;
  4. Be transferred to one or more qualified transferees – the decedent’s husband or wife, grandfather, grandmother, father, mother, or children, siblings or their children. Children include natural children, adopted children; and stepchildren;
  5. Owned by a qualified transferee for a minimum of seven years after the decedent’s death;
  6. Reported on a timely filed Pennsylvania inheritance tax return and filed within 9 months of the decedents date of death, or within 15 months of the decedent’s date of death if the estate or person required to file the return was granted the six month statutory extension.

The transferee must file an annual certification and notify the Pennsylvania Department of Revenue within thirty days of any transaction or occurrence causing the qualified family-owned business to fail to qualify for the exemption. Failure to comply with the certification or notification requirements results in a total loss of the exemption.

If you feel you qualify for the family-owned business exemption please contact Gregory J. Spadea online or at 610-521-0604 of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Filed Under: Business Law, Family Law, Qualifying for the Family-Owned Business Exemption from Pennsylvania Inheritance Tax Tagged With: , , , , , , , , , , , ,

Understanding the Difference Between Burglary and Criminal Trespass

October 28, 2014 by

intrusion of a burglar in a house inhabited

Burglary is the unauthorized entry into a building with the intent to commit a crime. If the building can accommodate overnight stays then the accused commits a felony of the first degree. In all other cases burglary is considered a second degree felony. A typical defense to burglary is that the building was abandoned at the time that the individual entered it. In addition, the prosecution must demonstrate that the accused actually intended to commit a crime after he entered the premises. Intent to commit a crime is often established through circumstantial evidence and may be shown by the accused actions, circumstances or any inferences therefrom. For example if the accused took a television from the building that could establish his intent to steal after he entered the building without the consent of the owner. Conversely, if the accused was intoxicated that could be a defense because he would be unable to form the intent to commit a crime.

Criminal trespass is when the accused enters or remains in a building without the consent of the owner or refuses to leave after being told to do so. Criminal trespass, like burglary is also a felony of the second or third degree based on the level of force used to enter the premises. If the individual breaks in, it is a 2nd degree felony and all other types of entry are considered a 3rd degree felony. Criminal trespassing can also be a misdemeanor where a court finds that an individual simply entered the premises without permission or refused to leave. However, such a trespasser faces incarceration after four convictions.

The reason the grading is important is because it determines the number of years of incarceration the accused will serve if found guilty. The maximum penalty for a felony, misdemeanor and summary offenses are as follows:

Felony 1st Degree 20 years in prison
Felony 2nd Degree 10 years in prison
Felony 3rd Degree 7 years in prison
Misdemeanor 1st Degree 5 years in prison
Misdemeanor 2nd Degree 2 years in prison
Misdemeanor 3rd Degree 1 year in prison
Summary Offense 90 days in county jail

If you are charged with Burglary or Criminal Trespass contact Gregory J. Spadea at 610-521-0604, of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Filed Under: Criminal Law Tagged With: , ,

What To Do If You Receive An IRS Summons

October 23, 2014 by

Notepad with sign Owe Taxes

A summons requires you to provide the Internal Revenue Service (IRS) with information that is relevant to your tax. The IRS will summon information after it has already informally requested the information using form 4564 – Information Document Request. The IRS uses a summons to determine whether a tax return is correct, to prepare a substitute for return when none was filed or to collect tax. To obtain this information, the IRS may serve a summons directly on the subject of the investigation or any third party who may possess relevant information. In doing so, the IRS may examine books and records including documents such as invoices or bank statements. The IRS may also summon the testimony of the person possessing the records.

In many cases, the IRS is required to notify the taxpayer about other persons or entities receiving the third-party summons. Two significant exceptions to this notice rule are: (1) the summons was issued in connection with a criminal investigation to a person who is not a third party record keeper such as a bank, an accountant, broker, enrolled agent or investment company, (2) the summons was issued in aid of collection of an assessment made or judgment rendered against the person with respect to whose tax liability the summons is issued. In other words, there has already been a judgment or tax assessment made against the taxpayer and the summons is an effort to collect monies from the taxpayer.

You should not ignore a summons because a federal court may find and hold you in contempt or, worse, you may be subject to criminal prosecution for a failure to obey a summons. If you fail to comply with a summons the IRS may petition the Federal District Court to enforce the summons. The IRS must establish that (1) the investigation will be conducted pursuant to a legitimate purpose; (2) the inquiry may be relevant to that purpose; (3) the information sought is not already in the IRS’ possession; and (4) the administrative steps required under the Internal Revenue Code have been followed. If the IRS does so you will have to contest the summons. You can contest a summons on substantive grounds, technical or procedural grounds, or on Constitutional or other privilege grounds. Substantive defenses typically include arguments over whether a particular matter is part of a legitimate investigation, or whether the persons or documents summoned are relevant to an IRS investigation. Technical or procedural defenses usually are not worth litigating because the IRS can simply issue another summons to correct the procedural errors. You can also assert privileges under the Fourth and Fifth Amendments of the US Constitution to prevent the summons from being enforced. These rights and privileges are asserted where the information sought is incriminating and protected from disclosure under the Fifth Amendment to the Constitution, or where the summons itself is so broad that it constitutes an unreasonable search under the Fourth Amendment to the Constitution.

If you receive a IRS summons you should contact Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC in Ridley Park, Pennsylvania. Mr. Spadea worked for the IRS for over 13 years and has extensive experience responding to the IRS and will determine when, and on what basis, you might refuse to answer the questions. Mr. Spadea will also help you evaluate which documents are relevant and, more importantly, which documents should be produced.

Filed Under: Tax Law Tagged With: , , , , , , , ,

9 Exceptions to the 10% Premature Distribution Penalty on Individual Retirement Accounts

October 16, 2014 by

2 elderly people on the couch

Whenever you take a premature distribution from your Individual Retirement Account (IRA) you have to pay a 10% penalty on the taxable amount of the distribution in addition to federal income tax. However there are 9 exceptions that you can use to avoid paying that 10% penalty which are as follows:

  1. Withdrawals That Count as Substantially Equal Periodic Payments (SEPPs). This exception is the same as the one for qualified retirement plan withdrawals, except separation from service is not required. The rules for SEPPs require you to receive a series of annual payouts. This is similar to an annuity which pays you an equal stream of payments for a set period. If you have several IRAs, you do not need to withdraw from them all. You only need to annuitize one or more of the IRAs to generate annual SEPPs that are big enough to meet your cash needs. However, the entire balance in all your IRAs must be considered and annuitizing only a portion of an IRA does not qualify for this exception. Unfortunately, the SEPP exception has two important requirements that you need to be aware of:
    • (1) Once begun, the SEPP must continue for at least five years or, if later, until the owner reaches age 59 1/2. If the SEPPs are stopped too soon, all the previous age 59 1/2 withdrawals that were thought to have been taken under the SEPP exception are subject to the 10% penalty tax. The same thing can happen if the annuitized account is modified during the period when SEPPs are required, for example by making annual contributions to that account or by rolling over all or part of that account into another account.
    • (2) Annual SEPP amounts must be calculated correctly. If the correct annual amounts are not withdrawn, it is deemed to be a prohibited modification of the SEPP, which results in all the previous age 59 1/2 withdrawals that were thought to have been taken under the SEPP exception being hit with the 10% penalty tax.
  2. Withdrawals for Medical Expenses in Excess of 10% (or 7.5% if you or your spouse are over 65) of Adjusted Gross Income (AGI). This exception is the same as the one for qualified plan withdrawals.
  3. Withdrawals by Military Reservists Called to Active Duty. This exception is the same as the one for qualified plan withdrawals.
  4. Withdrawals for IRS Levies. This exception is the same as the one for qualified plan withdrawals. Note that this exception is unavailable when the IRS levies against the IRA owner (as opposed to the IRA itself), and the owner then withdraws IRA funds to pay the levy.
  5. Withdrawals after Death. This exception is the same as the one for qualified plan withdrawals. Note that this exception is not available for funds rolled over into a surviving spouse’s IRA or if the surviving spouse elects to treat the inherited IRA as her own account. Therefore, the surviving spouse should leave amounts that will be needed before age 59 1/2 in the inherited IRA. This way, the 10% penalty tax can be avoided on those amounts.
  6. Withdrawals after Disability. This exception is the same as the one for qualified plan withdrawals.
  7. Withdrawals for First-time Home Purchases. This exception applies only to IRAs. It allows penalty-free withdrawals (up to $10,000 per lifetime) to the extent the account owner uses the funds within 120 days to pay for qualified acquisition costs for a first-time principal residence. The principal residence can be acquired by: (1) the account owner or the account owner’s spouse; (2) the account owner’s child, grandchild, or grandparent; or (3) the spouse’s child, grandchild, or grandparent. The buyer of the principal residence (and the spouse if the buyer is married) must not have owned a present interest in a principal residence within the two-year period that ends on the acquisition date. Qualified acquisition costs are defined as costs to acquire, construct, or reconstruct a principal residence-including closing costs.
  8. Withdrawals for Qualified Higher Education Expenses. This exception only applies to IRAs. Early IRA withdrawals are penalty-free to the extent of qualified higher education expenses paid during that same year. Qualified higher education expenses include amounts paid for tuition, books, fees and other related expenses for an eligible student. This amount will be reflected on a form 1098-T that the school will send to the student. However, the qualified expenses must be for the education of: (1) the account owner or the account owner’s spouse or (2) a child, stepchild, or adopted child of the account owner or the account owner’s spouse.
  9. Withdrawals for Health Insurance Premiums during Unemployment. This exception only applies to IRAs, and is available if you received unemployment compensation payments for 12 consecutive weeks under any federal or state unemployment compensation law during the year in question or the preceding year. If this condition is satisfied, your early withdrawals during the year in question are penalty-free up to the amount paid during that year for health insurance premiums to cover the account owner, spouse, and dependents. However, early withdrawals after you regain employment for at least 60 days don’t qualify for this exception.

If you took a distribution from your IRA and received a form 1099-R with a distribution code of 1, and feel you meet one of exceptions listed above, please contact Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC located in Ridley Park, Pennsylvania.

Filed Under: Tax Law Tagged With: , , , , , ,

Why I Should Consider Using a Qualified Personal Residence Trust

September 22, 2014 by

A house

If you own a residence or a second home and expect to pay federal estate tax and want to pass the property to your children, then you should consider a Qualified Personal Residence Trust (QPRT). You transfer your personal residence or vacation home into the QPRT in exchange for continued rent-free use of the property for a specific number of years (trust term). Assuming you survive the trust term, the residence either passes outright to the beneficiaries of the trust or can remain in trust for their benefit. It is important that you understand that you can continue to use the property once the title has been transferred to the QPRT, but when the term ends you will have to pay rent to the new owners.

A QPRT is valuable because it reduces your taxable estate and freezes the gifted property value so all the appreciation is excluded from your estate. The valuation of this transfer is dependent upon several factors including the trust term, life expectancy of the grantor and the IRS §7520 interest rate for the month of the transfer.

For example if Regina, age 65, on September 15, 2014, transfers her beach home with $1 million market value to a QPRT, she retains the right to use the home for a term of 10 years. Assuming she outlives the 10-year trust term, the house would pass to her three children. The Internal Revenue Code §7520 rate in the month of the gift (September 2014) is 2.2% so the initial taxable gift would be valued at approximately $425,000. So long as Regina’s lifetime taxable gifts have not exceeded $5.34 million which is the 2014 limit, no federal gift tax would be payable, although she would have to file a federal gift tax return. In any event, if Regina survives for the full trust term, the residence will pass to her three children with no additional gift or estate tax inclusion. Assuming the beach home was worth $2.5 million at the end of the 10 year term, Regina would have been able to transfer a $2.5 million beach home to her three children at a transfer tax inclusion of $425,000. Because a QPRT is a future interest gift, the $14,000 annual gift exclusion is not available. However, if Regina does not outlive the ten year trust term then fair market value of the beach home is brought back into her estate while the earlier taxable gift of $425,000 is removed. If the beneficiaries inherit the house before the trust term ends they will get a step up in basis to the fair market value of the property for federal income tax purposes. However, if the beneficiaries sell the house after the trust term they get the grantor’s basis. So if Regina’s basis is $550,000 and the beneficiaries sell the house for $2,500,000, they would have to pay federal income tax on the capital gain of $1,950,000.

After the 10 year trust term Regina could lease the beach home from her three children. Lease payments are another means to benefit heirs without any further gift or estate tax consequences. However, the children would have to pay income tax on the net lease income.

The older you are and the longer the trust term, the smaller the taxable gift. However, you must outlive the trust term. Therefore, your current health and family medical history should be a major focus of QPRT planning. In addition you should ensure the beneficiaries have the same opinion of what to do with the property after the trust term ends. If you have any questions please contact Gregory J. Spadea at 610-521-0604, of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Filed Under: Estate Planning, Real Estate Tagged With: , , ,

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