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Private Annuity Trust
An alternative to a 1031 Exchange. This is important information you should know before you sell your property.
If you are, or someone you know is sitting on properties with large amounts of equity in Huntington Beach or the South Coast Metro area or anywhere in Orange County, in fear of Capital Gains taxes then you may want to consider The Private Annuity Trust (PAT).
There is no maximum to the size of any transaction and the trust may be used with any kind of real estate property such as owner occupied single family homes, land, commercial properties, apartment buildings, high rises, vacation homes, hotels, industrial storage facilities, retail mall developments and more.
A PAT is an IRS accepted program (Section;72 of the IRC) which will allow the seller to defer capital gains taxes. This type of annuity is used when an individual has a property or highly appreciated asset which is then sold through the trust to defer the capital gains that are due at time of sale.
The trust does not eliminate the taxes, but rather defers them for long term, often for decades based on age and time of retirement. The deferral takes place because the property or asset owner receives his or her sale proceeds in a lifetime income payout from a private contract, as well as a portion of capital gains and re-capture tax are paid as the income stream is received.
When the annuitant begins to receive annuity payments, some of each payment will be subject to a fraction of the original capital gains taxable amount. The taxable amount will be spread out over the balance of the annuitant's life expectancy. The annuitant can also borrow money out of the trust for other investments like other real estate.
The trust belongs to, and is controlled by the seller's family and its beneficiaries are the heirs or children of the property. The trust is irrevocable and the assets are not subject to federal estate taxes, family liabilities, creditor seizures, probate or Medicaid.
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