CONeal Posted December 28, 2012 Share Posted December 28, 2012 I know that everyone will say consult a lawyer but trying to get a general idea of what could be done in order to ask a lawyer. This is in the US so any ideas are welcome. A person is a 1/3rd owner in a farm and wants to pass it off to their children so if further down the road a nursing home can not go after it and to make sure it stays in the family. I am aware that the asset has to be removed from the elder for 7- 10 years before the nursing home. How do you go about passing off the asset since the overall portion of your 3rd interest is greater then the 12k/yr gift limit? There would not be any issue with the owners that make up 2/3rds of the partnership with it being passes off to the children. Link to comment Share on other sites More sharing options...
Kraven Posted December 28, 2012 Share Posted December 28, 2012 I know that everyone will say consult a lawyer but trying to get a general idea of what could be done in order to ask a lawyer. This is in the US so any ideas are welcome. A person is a 1/3rd owner in a farm and wants to pass it off to their children so if further down the road a nursing home can not go after it and to make sure it stays in the family. I am aware that the asset has to be removed from the elder for 7- 10 years before the nursing home. How do you go about passing off the asset since the overall portion of your 3rd interest is greater then the 12k/yr gift limit? There would not be any issue with the owners that make up 2/3rds of the partnership with it being passes off to the children. I have no idea, but note that the $12K/yr (I think it's $13K/yr now, but not sure) gift limit applies to the level at which gifts may be given without having to pay gift tax. So the gift can be given, but gift tax would need to be paid on the amount in excess of that level. Note too that the people making the gift can each give that amount, so a couple could theoretically give to one person up $26K. If this property is being donated to multiple people then you can see how this could be increased. So for example, say the property is being donated to 3 children. Each donor could gift up to $13K to each person, so that's $78K. This is just my understanding. I have no idea if it's correct or not. You definitely need to consult with an estate planning attorney in your area. If you don't know of one, just ask around for a couple of recommendations. Usually an estate planning attorney isn't terribly expensive (relatively speaking) depending on the size of the assets and complexity of the matter. I would advise, don't be like most people and balk at paying the $1000 or $2000 or whatever a good estate attorney will charge. That falls into the category of being penny wise and pound foolish. Good luck. Link to comment Share on other sites More sharing options...
bookie71 Posted December 29, 2012 Share Posted December 29, 2012 I know just enough about estate and trusts to be very, very dangerous, so see an estate lawyer to check this out. The yearly gift exemption is 13,000 per person. If you are married your spouse can elect to give another 13,000. If the value is greater then you go against your lifetime exemption which is 5,000,000 BUT goes to 1 or 2,000,000 in 2013. If more then you pay tax at a very high rate (35 or 45%). This lifetime exemption is for both your estate and gifts. Link to comment Share on other sites More sharing options...
woltac Posted December 29, 2012 Share Posted December 29, 2012 You can split the gift over 2 or more years if necessary. A family limited partnership may also be appropriate. Here is a link to an explanation of the FLP from legalzoom: http://www.legalzoom.com/planning-your-estate/estate-planning-basics/flp-what-is-family Link to comment Share on other sites More sharing options...
CONeal Posted December 29, 2012 Author Share Posted December 29, 2012 Thanks for the suggestions. Y'all gave me a couple of things to bring up and think about. Link to comment Share on other sites More sharing options...
SharperDingaan Posted December 29, 2012 Share Posted December 29, 2012 Just a consideration .... buy out the elder, & get gifted enough each year to cover the interest cost. Link to comment Share on other sites More sharing options...
Packer16 Posted December 29, 2012 Share Posted December 29, 2012 You are also going to want to discount the appraised value for lack of control and marketability in your valuation of the gift. Packer Link to comment Share on other sites More sharing options...
CONeal Posted December 30, 2012 Author Share Posted December 30, 2012 You are also going to want to discount the appraised value for lack of control and marketability in your valuation of the gift. Packer What would be a legitimate discount rate that would pass the smell test? Link to comment Share on other sites More sharing options...
Packer16 Posted December 30, 2012 Share Posted December 30, 2012 It depends upon many factors including: the partition rights, what state the farm is in, does the interest generate any income, what form of business (S vs. C) is the interest a part of, what restrictions on transfer may be in any business incorporation documents. If it is a substantial size gift you may want to get it appraised and substantiated with an appraisal that can stand up to IRS questioning. An estate attorney should be able to provide you guidance on the risks and at what size should you get an outside appraisal. Packer Link to comment Share on other sites More sharing options...
Guest deepValue Posted December 30, 2012 Share Posted December 30, 2012 The answer depends a lot on what other assets the person wants to pass down in the future. My grandparents on both sides set up family limited partnerships, which have worked wonderfully. Passing down parcels in $12k/$13k chunks each year also works if the total amount can be gifted in a reasonable amount of time. You will need a good lawyer if you go the partnership route; you need to act carefully in order to avoid drawing the suspicion of the IRS. Link to comment Share on other sites More sharing options...
valuecfa Posted December 30, 2012 Share Posted December 30, 2012 I know that everyone will say consult a lawyer but trying to get a general idea of what could be done in order to ask a lawyer. This is in the US so any ideas are welcome. A person is a 1/3rd owner in a farm and wants to pass it off to their children so if further down the road a nursing home can not go after it and to make sure it stays in the family. I am aware that the asset has to be removed from the elder for 7- 10 years before the nursing home. How do you go about passing off the asset since the overall portion of your 3rd interest is greater then the 12k/yr gift limit? There would not be any issue with the owners that make up 2/3rds of the partnership with it being passes off to the children. There are several options that could probably suit your needs. Of course everyone's circumstances are different, but here are a few options to ponder...An estate planning attorney can structure an irrevocable trust for you that you can most likely tailor to meet your specific circumstances, or an attorney might be able to structure your share as having certain rules attached to your interests. Or you could gift them the majority of your interests yet remain the controlling party with minority interests through a dual voting structure in the partnership. I would consult with a knowledgeable estate planning attorney. This question comes up frequently, especially in farm interests. Of course the lifetime gift tax exclusion is about $5million for 2012, but is due to drop back to around $1 million in 2013 if no congressional/presidential action takes place. Link to comment Share on other sites More sharing options...
valuecfa Posted December 30, 2012 Share Posted December 30, 2012 By the way, if your logo is any indication of where you live your initial consultation should be ~ free and then if they end up drafting a trust for you it would likely be a fairly simple one and end up costing you in the $3,000 -$10,000 range in your area by a reputable firm. I know of one firm in the Hot Springs area that i have dealt with through work and they seem to be well regarded. Link to comment Share on other sites More sharing options...
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