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We know that you can give up to $12,000 per person per year and never pay a federal gift tax - thanks to the annual gift tax exclusion. That is fine if you are writing out a check or just giving cash. But, how can you give someone a house or a business or anything else that is not money and still have it come under the annual gift-tax exclusion?

Make Money Online Let's say your parents have a condo in Florida that they bought several years ago for $100,000, and it is now worth $400,000. Now, they want to give it to you and your two sisters because they are concerned about the new Medicaid laws and their estate taxes.

Section 6166 offers estate tax deferral for small business owners. To take advantage of Section 6166, more than 35% of your adjusted gross estate must be from your business interests. If eligible, your executor can pay the estate tax in 10 annual installments. This alleviates the burden of having to generate one lump sum within 9 months of your passing. Under 6166, the first installment isn't due for five years. This gives your business time to earn the money to cover the taxes.

Internet Business Opportunity Qualifying the entire $400,000 condo under the annual gift tax exclusion is not easy. First, it is hard to gift real estate in $12,000 increments. Sure, you can do it by simply dividing the value of the condo ($400,000) by the annual exclusion amount ($12,000 in 2006). In our example, $12,000 is equal to a 1/34th interest in the condo, which means that each of your parents could give you and each of your sisters a 1/34th interest in the condo each year. At that rate, it would take roughly 6 years to complete the transfer. If spouses were included in the annual gifts, then the time needed to transfer the entire condo would be reduced to about three years. [Careful planning could reduce that time to 366 days by making the first transfers on December 31st, the second transfers on the following January 1st, and the final transfers on January 1st of the next year.]

Real Estate For many people, a home is not only a shelter for their family, but also the only real tax shelter available. The opportunity to reduce your income taxes by deducting your mortgage interest payments, the points you may have paid when taking out your loan, and your real estate taxes is one of the most important reasons for owning a home.

Free Money Seems pretty cumbersome though, doesn't it? And, it is. Besides, every year your parents would have to prepare a new deed for each gift and would have to record each deed on the land records. Plus, they will probably need an attorney to take care of all that for them. The costs for all that work, including the recording fees, can be quite substantial. Then, when all of you decide to sell the condo, you'll have to put 34 different deeds together, with every owner signing off on the sale.

The Deduction for Real Estate Taxes Next to the home mortgage interest deduction, the most important tax break for homeowners is probably the deduction for state and local taxes, including real estate taxes. Your real estate taxes are fully deductible, whether they are imposed by the state, county, city, township, or some other local government body.

Work At Home Business There is still another problem - that is, you have to make sure that your values are all correct. You see, if you give money, there is no queston as to what the value of the gift is. With anything besides money, whether it is real estate, stock, bonds, collectibles, etc., there is often no readily ascertainable value. So, you need to have the property appraised by a qualified appraiser so that the value comes under the annual exclusion. There are rules for doing this and, if you don't comply, then the IRS can always challenge your value. If the value is found to be more than the annual exclusion amount, then you would have to file a gift tax return each year and possibly pay a gift tax. Appraisals cost money and have to be done every time a gift is made.

Let's look at some estate planning strategies for you, the small business owner. Minimizing Taxes If nothing else, one good reason for estate planning is to minimize the amount your estate will owe in taxes. You've worked hard to establish your business as a profitable entity. Don't lose the fruits of your labor to the IRS in estate taxes. This type of tax, also called death tax, usually ranges from 35 to 50% of the business value and is due within nine months of your passing.

Free Online Affiliate Program Is there a better way to transfer real estate under the annual gift tax exclusion? Sure there is! No one wants to transfer real estate in the manner we just discussed. It is just too cumbersome, time consuming, and expensive. The preferred way to transfer real estate under the annual gift tax exclusion is to use a separate legal entity, such as a corporation, or a limited liability company, or a family limited partnership to facilitate the transfer. My preference is a limited liability company (LLC) because it is easy and inexpensive to set up, and does not create the need for additional on-going expenses.

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Auction Coin Money Paper Here is how it works: First, your parents would create a limited liability company. Let's call it the Smith Family Condo, LLC. The LLC would be created with 34 membership units ($400,000 / $12,000). Your parents would then transfer their condo to the LLC in exchange for all 34 membership units (each parent would receive 17 membership units). Only one deed is necessary when your parents transfer the condo to the LLC, and only one recording is required. Likewise, only one appraisal is necessary to establish the value of the condo at the time of the transfer.

Franchise Business Opportunity Now, whenever your parents wish to make a gift to each of you under their annual gift tax exclusion, all they have to do is transfer one membership unit in the LLC. No further deeds are required, no recording of deeds is required, and no attorney's fees are required. The transfers have to be reflected on the books of the LLC, but that is it. Not only does the LLC make it very easy to transfer the property in the first place, it also makes it very easy to manage the property and eventually sell it when the time comes.

Best Free Online Affiliate That is the preferred way to transfer real estate or any other type of property to multiple beneficiaries under the annual gift tax exclusion.

Blogging Money Thebillivard Next time: Is it so terrible if you go over the annual gift tax exclusion amount in any year?

Best Home Based Business Attorney Michael P. Pancheri is a practicing attorney and the founder and CEO of the Living Trust Network. You may contact him by email at info@livingtrustnetwork.com. You may also contact him at the Living Trust Network's web site. Its URL is http://www.livingtrustnetwork.com.

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