| The estate tax recently lapsed in 2010. Congress didn't | | | | children will pay for a mortgage to buy the house from |
| renew it because they were too busy worrying about | | | | you. For example if your kid buys the house and takes |
| health care reform. That means that if you die in the | | | | out a loan that he or she has to pay $2,000 a month |
| year 2010, you won't owe any estate tax. Yes, you | | | | for, you would pay him $2,000 a month in rent. Where |
| read that right you will not own a single penny in estate | | | | do you get the rent money? From the proceeds of |
| tax for 2010. | | | | the sale of your house of course. You get the idea... |
| But you can bet Congress isn't going to be idle, they | | | | There are a few things that you have to keep in mind |
| have the whole rest of the year to pass a new estate | | | | when doing something like this. The IRS will scrutinize |
| tax law. And with the Democratic Party running | | | | these sorts of arrangements very closely so you have |
| Congress at the moment, you can expect that they're | | | | to be careful not to get tripped up. Here are a few |
| going to try everything they can to charge you as | | | | things to look out for... |
| much tax on your estate as they can get away with. | | | | Be sure to sell the house for its fair market value. If |
| They're very open about it; it's one of their main goals | | | | you sell it too cheaply, the IRS may consider it a gift to |
| after health care reform. | | | | your children and apply gift tax. |
| Now there are many different things you can do to | | | | Next, remember that the mortgage interest that your |
| lower your potential tax liability when it comes to | | | | children pay is deductible to them, however it is taxable |
| estate planning. There are Trusts of a zillion different | | | | to you. That is to say, you can't really deduct rent |
| stripes that you can set up that will tailor to your | | | | payments like you can mortgage payments... and if |
| specific situation. Of course you need an accountant | | | | you're used to deducting mortgage payments on your |
| and a lawyer who specializes in estate planning and | | | | tax return, this may take some adjusting and getting |
| asset protection to set these things up... | | | | used to varying it. |
| One of the easier ways to plan for your estate in | | | | Next, realize that the rent payments that you pay your |
| order to minimize taxes is to make sure that you don't | | | | children each month are taxable income to them. That |
| have much by way of physical property that the | | | | means that they will have to pay taxes on that rent. |
| government can tax when you pass away. No I'm not | | | | Finally make sure you have documented all of this |
| suggesting that you become poor, just that you plan | | | | scrupulously. Make sure you create and sign an actual |
| accordingly. | | | | rental agreement between you and your children, and |
| One way to do this is to sell your house to your | | | | make sure that you actually pay the rent each month. |
| children now, and pay them rent each month. This way | | | | And be sure to keep records of all the rental |
| you get to enjoy living in your house, but you don't own | | | | payments. The more specific documentation you keep, |
| it. So when you die there's nothing to tax. | | | | the more realistic the whole thing looks in the eyes of |
| The idea is to pay rent roughly equal to what your | | | | the IRS. |