Presentation on theme: "Brought to you by Parse Financial Wealth Management"— Presentation transcript:
1 Brought to you by Parse Financial Wealth Management DEFERRED SALES TRUST™Brought to you by Parse Financial Wealth Management
2 Deferred Sales Trust™ Parse Financial Wealth Management Brought to you byParse Financial Wealth Management
3 Deferred Sales Trust™ Tax Efficient Exit Strategy Sell more real estateGet clients off the sidelinesPosition yourself for successA Deferred Sales Trust TM – DST TM is a strategy that allows a Client to sell an appreciated asset, receive the proceeds as liquid cash and pay capital gains taxes over many years rather than immediately. The possible benefits include reliable income from the trust, flexibility in how the trust is invested (i.e. bonds, stocks, or real-estate), protection from lawsuits and creditors, and with the proper planning, the assets can be arranged to pass to your beneficiaries estate and gift tax free.
4 Meet John & Patty… Their Story: Bought a hotel for $5,800,000 Selling the property for $8,000,000 Mortgage Payoff: $2,400,000Equity gain: $2,200,000Depreciation: $400,000Taxable Gain: $2,600,000Personal Information:Married, John age 54, Patty age 5137 year actuarial life
5 Normal Transaction Sell Property Real Estate John & Patty Age: 54 and 51Net Sale Proceeds $5,600,000Sale Price $8,000,000MortgagePayoff$2,400,000Taxable Gain $2,600,000
6 Normal Taxation Real Estate Sell Property Net Sale Proceeds $5,600,000 Sale Price $8,000,000John & PattyAge: 54 and 51Federal and State* taxes: 24.3%*CaliforniaDepreciation lowers basis which increases GainTaxable Gain: $2,600,000Depreciation: $400,000$4,968,200After tax proceedsTaxes: $631,800
7 Compare Normal vs. DSTReal EstateSell PropertyJohn & PattyNormal Transaction: $4,968,200 grows to $ 1,058,384With the DST: $5,600,000 grows to $ 8,698,137Both assume 7% growth and $372,159 per year for 37 yearsDifference is the compounding of $631,800 for 37 yearsThe annual distribution and actuarial calculations are taken from a DST illustration. Assumptions: $5,600,000 compounds at 7% annual growth over a 37-year period, net of a $372,159 distribution paid annually. Results shown are after-tax. Tax liability varies with type of investment -- typically tax-efficient and tax-deferred. This scenario assumes earnings taxed at capital gain rates. Normal Transaction is using the same assumptions as the above with the exception of a $631,800 beginning tax payment. This scenario makes certain assumptions in order to illustrate the important aspects of this program. These assumptions may not and are not intended to be representative of the situation that all sellers of real estate property face. The particular circumstances which prospective sellers face exert an effect on the outcome of this strategy and, in turn, influence whether it is suitable for a client to undertake. There may also be additional considerations not accounted for in this example that may further affect whether this plan is appropriate for a particular property seller. Therefore, prior to engaging in this transaction, it is necessary that the prospective participant review their tax situation with their tax advisor to ascertain if this type of program is right for them.
8 Deferred Sale Trust Step #1 We have EPT’s Legal Network attorney set up John and Patty’s Deferred Sale TrustThey choose their trustee who follows their instructions(Can be a family member other than children unless they are co-TT’s)
9 Deferred Sale Trust Step #2 Complete asset retention in a tax deferredtransactionReal EstateSale Price $8,000,000Step #2John and Patty transfer asset(s) to their Deferred Sale Trust before escrow closesThey choose their trustee who follows their instructions(Can be a family member other than children)
10 Deferred Sale Trust $ Step #3 Real EstateSale Price $8,000,000$Step #3The Deferred Sale Trust sells the real estate and there is no gain on the sale to the trustNet SaleProceeds$5,600,000(Depreciation increases capital gain And is deferred)
11 Deferred Sale Trust $ Step #4 Real EstateSale Price $8,000,000$Step #4Trust pays John and Patty (age:54 and 51) an annual income of $372,159 for yearsLifetime income can be increased or reduced depending on their goals and estate planning objectives
12 Income taxes due on a portion of annual income Deferred Sale TrustReal EstateSale Price $8,000,000Annual Income Recap:Tax Free Basis $ 74,799Capital Gain $ 75,335Ordinary $222,025Total Income $372,159$IRS receives 100% of the tax due, but spreads it over the term of the contract.Like an interest free loan from the IRS!Step #5John and Patty pay taxes: capital gains - $18,306 ordinary income (% set by their tax bracket)Step #4Income taxes due on a portion of annual income$
13 John & Patty’s Beneficiaries Deferred Sale TrustReal Estate$$Sale Price $8,000,000Step #6John and Patty deceased; total value of Trust transferred estate tax free to their heirsDeceasedJohn & Patty’s Beneficiaries
14 Frequently Asked Questions Can we use a portion of the proceeds to re-invest in real estate at a later time?YesIf I’m in escrow right now, can I still use a Deferred Sale Trust™?Can we borrow from the Trust?
15 Deferred Sale Trust - Advantages Income Tax Savings - When appreciated property is sold, the seller defers recognition of gain until receipt of paymentsEstate Tax Savings - Removes transferred property and all future appreciation from the estate without use of gift or estate tax exemptionsMaintains Family Wealth - Maintains wealth within the familyEstate Liquidity - Converts an illiquid asset into monthly paymentsRetirement - Provides a stream of income for retirementProbate Avoidance - Avoids probateAsset Protection - A DST may place the transferred property beyond the reach of potential creditors and litigants if the transferor retains no interest in the transferred propertySecurity - Asset must be transferred on an secured basis
16 Tax Planning Alternatives Taxed Sale – pay the taxes1031 ExchangeDefective Grantor TrustCRT (Charitable Remainder Trust)CLT (Charitable Lead Trust)GRAT (Grantor Retained Annuity Trust)ILIT (Irrevocable Life Insurance Trust)It is important that your client discuss their unique circumstances with our tax attorneys to help them determine the best course of action. This service is provided at no cost to you.
17 How Is The Money In The Trust Invested? Depending your client’s goals and objectives, we work with some of the largest financial institutions in the world to develop strategies for:Asset PreservationTax EfficiencyLiquidity
18 The Deferred Sale Trust TM Fill out the free tax-savings illustration form today and find out what the Deferred Sale Trust can do for your client.
19 DEFERRED SALES TRUST™ email@example.com Brought to you by Parse Financial Wealth ManagementBobby Kashani, CFP®16520 Bake Pkwy Suite 105Irvine, CA 92618Office: (949)Fax: (949)