Los Angeles, California – A couple in Los Angeles, California, is seeking advice on how best to transfer their properties to their children without incurring substantial taxes. The couple, who have acquired multiple properties over the years, are hesitant to wait until their passing to gift the properties, as they find the idea unappealing.
One option presented to the couple is transferring the properties to their children during their lifetime. However, it is important to note that this may result in the children assuming the tax liabilities associated with the properties. By doing so, the children would inherit the tax basis of the properties, meaning they would be responsible for paying taxes on any appreciation since the real estate was initially purchased.
Alternatively, if the properties are bequeathed to the children after the couple’s passing, the properties would receive an updated value for tax purposes. In such a scenario, any appreciation that occurred during the couple’s lifetime would not be subject to taxation. It is suggested that the couple consult with an estate planning attorney and a tax professional before making a decision on how to proceed with gifting the properties.
Another concern raised in the article relates to the impact of property sale profits on Social Security benefits. The individual in question experienced a decrease in their monthly Social Security benefit due to capital gains from a property sale triggering the Income-Related Monthly Adjustment Amount (IRMAA) for Medicare. This ultimately led to a reduction in benefits despite a recent cost-of-living increase.
Fortunately, the article reassures the individual that the IRMAA deductions are not permanent. The increase in Medicare premiums, based on income from two years prior, should disappear in the following year if the individual’s income returns to normal. This adjustment should result in the restoration of the individual’s Social Security benefits to their most recent levels.
In conclusion, navigating tax implications when transferring properties to family members can be complex. Seeking guidance from professionals such as estate planning attorneys and tax advisors is essential to ensure that such transfers are executed in the most financially advantageous manner. Additionally, understanding the impact of property sales on government benefits like Social Security is crucial for individuals planning their financial future.