How do we set up a family trust with properties involved?

Question

Is there a good website that we can go to to learn about how to do it..Do you know the advantages and disadvantages to doing so...can we avoid capital gains...etc. Can it be set up on a percentage basis for family members who contribute time and or money? Thanks.

Answer 1

Jenny,

A trust may not be the most beneficial way to own properties. You certainly can not avoid capital gains with any trust unless you use a charitable trust which involves giving your property away. Some trusts may bring with them higher tax rates than owning the property individually.

Something to consider is owning the property in an LLC or S corp. The tax treatment is the same as if you owned it individually, but it is easier to have other owners (like your family). It also can be owned proportional to the contribution each person makes to the asset.

An additional consideration is that an LLC or S corp provide liabilility protection. This is CRITICAL if the property is commercial property or anything other than your home, due to environmental law which carries hefty costs/penalties if there is an environmental problem on the land.

We can help you work through this, but we charge for doing so. If you would like help - e-mail me.

Dana B.
President - Wealth Management Firm - Texas