Hot tip, courtesy of the New York Daily News on how to save yourself a bundle on inheritance taxes.
Basically, at least how I read it, you take ownership (through a trust) of your parents’ home and then let them live there, for free, for a set number of years (they can live there after the agreement expires, but they’ll have to pay you market rent).
Here’s how you save: the IRS realizes you won’t be able to actually sell the property until some unknown date in the future, so it figures out what the property is worth, now. For example, a home worth $500,000, if you sold it, today, is only worth $50,000, if you’re going to have to wait 10 years before you can sell it.
When you do sell it, in ten years, all proceeds, 100%, goes to the heirs, and not to the IRS. (Oh, those silly tax laws.)
Even if the property is only worth $500,000, today, you still may benefit by setting up the trust – assuming a 4% increase in annual home prices, the property may be worth $1,000,000 in twenty years, and the heirs may face an inheritance tax bill of half, or $550,000.
More information: Trust-worthy homes: Protecting your heirs from the taxman – By Phyllis Furman, The New York Daily News