Best estate scenario

Your friend keeping the real estate IS an option, and will provide the best result. Put everything in a trust to avoid probate. Done right, this will not trigger a property tax reassessment as long as your friend is alive. Find a good real estate management company to keep the properties maintained and the income flow. Getting rid of the renters is of no benefit and is a bad idea.

Did you mean the nephew keeping the real estate when he inherits is not the option? If not, sell at that time, not now.

There is about $1,000,000+ in cash equivalents such as CDs and Ibonds. In addition Ed owns some duplexes on a single lot with renters. Ed lives in one unit. Should he remove all renters 2 years prior to any sale to get the exemption? (Not sure of the amounts or rules) This property is located in LA County Calif and due to the prop 13 - property taxes are only about $2500 per year. (Without prop 13 taxes would be double that.)

scenario 1 Ed needs to do nothing and everything will be sorted out in a standard probate (whatever that is).

scenario 2 Sell now and pay whatever taxes may result. Ed moves to a rental for his remaining years.

scenario 3 Transfer the real property to some kind or trust NOW to avoid the God Awful probate. Do what with the cash? This could perhaps trigger the prop 13 and doubles property tax for a few years. Ed the owner becomes a trustee.

Question - which or what would be the best plan to make sure nephew gets the most value? (keeping the real estate is not an option)

Ed does not have either an attorney or tax accountant. How would he go about finding qualified pros. Clearly he must have a will prepared to protect the Nephew. That is the simple part. The Ibonds have no taxes due until withdrawn - would this apply in this case if the money are inherited? Ed is a very self-reliant person and wants to keep control as long as possible.

Thanks in advance for your suggestions. Mic =====================What are you trying to minimize? The trust will avoid probate but won't change any of the taxes.

This would have no effect on Federal Estate Tax, or on California's [repealed] estate tax (based on the state's federal estate tax credit).

I don't see any effect to county property taxes either. Uncle-Nephew is not one of the recognized relationships which bypass revaluation of the property tax base. Only [grand-]parent-[grand-]child is recognized in California, and such isn't automatic. One must file for the exclusion prior to or within 6 months of the revaluation or prior to any sale to a non-bypass party, or the County could succeed in revaluation at the higher rate.

Thanks for responding, The idea is to keep all costs and expenses to a minimum so the nephew gets the most $. He is a young PhD in science in the EU and in no position to deal with a blood sucking management company - due to all his work and responsibilities.

What kind of total costs should one anticipate for setting up a (legitimate) trust? We have all seen or been told about the seminar and a $100 trust.

A smaller lot next door sold for 1million about 10 years ago. Each was purchased about 40 years ago for 50K. Some depreciation was taken prior to 1995 or so (perhaps 100k at most - remodel etc.). Can this be ignored when older than ??? age?

There would be fed long term cap gain tax - now 15%? I had a notion that for fed tax purposes there was no tax on inherited money no matter who the recipient was.

The Calif State tax would be how much today?

L A county stamp tax???

If the property was transferred by a standard probate - what approximate blood sucking cost should one anticipate from the courts and attorney handling it? I have another (incorrect) notion there are standard % amounts.

Any other costs one should anticipate?

If Ed lives on the property for two (?) years continuously with no renters is there not a standard deduction of 250k or 500k if married?

Would the cash equivalent CDs etc. also be taxed when passed to the nephew in an inheritance situation?

Thanks again for your reply. mic

I think that your friend's best options would be difficult to guess at without knowing all of his specific facts and circumstances as well as the local, state, and federal laws that would be applicable.

About 5 years ago, I researched and found a law firm in my area (in New Jersey) that specializes in tax, estate, and inheritance law. Almost everyone in the firm is a tax attorney and a CPA or similarly qualified accountant. Back then, their normal hourly fee was about $300 for attorney time and less for legal assistant time. I scheduled an initial consultation visit which took about an hour. Then they did a will, trust, and other estate planning documents for me which only took them a few more hours to do -- some of which were at the lower legal assistant rate.

All in all, I think it only cost me about 1,500 bucks to get the advice on what to do and for them to do all of the documents. My assets were WAY less than your friend's assets although, like him, I owned (and still own) some rental properties as well as my own home/residence.

As an aside, I first looked in what is called a Lawyer's Diary book for attorneys who practice in my state. In the middle of the Lawyer's Diary was a legal article about New Jersey estate and inheritance tax law. The article included the background and experience of the attorney who wrote the article, and it turned out that he was a partner in the above law firm that I mentioned, and the firm was located a few miles from me. So, I picked him -- an expert in the field of New Jersey estate and inheritance tax law, and someone who writes articles and teaches other attorneys on the subject.

So, in short, my suggestion is to help your friend find the right legal and accounting expert in this area of law who practices in or near where your friend lives. Then help get your friend to do an initial consultation with that attorney (who hopefully is also a tax accountant) expert and help your friend plan and set up everything that he needs to best help his nephew when the time comes since that is his goal. It will be money well spent..