How Changing Estate Tax Laws May Increase Inventory

In combination with ObamaCare, which will have a 3.8% tax on all non-earned income, and a significant increase in capital gains tax, it appears that the estate tax law changes for 2013 may increase inventory by year-end for local real estate.

As you may recall from my previous article, the capital gains tax is rising from 15% to 23.8% in 2013. Unless things change over the next two months, those with sizeable estates will be subject to a 55% tax on any estate over $1M for individuals and double if married. Currently, the estate tax laws allow an estate up to $5.12M (per individual) exempt from taxes and a 35% tax on estates above the $5.12M mark.

As mortgage professionals, we bring this up because lately we have received many inquiries about refinancing properties in an irrevocable trust. In anticipation of the upcoming changes to the estate tax law, many trustors (creator of the trust) are attempting to quickly transfer a sizeable portion of their property to their beneficiaries. As we all know, one needs to be careful about transferring any beneficial interest in real estate to another party, as doing so can cause the lender to call the mortgage due and payable. That said, given a potential perfect storm on the tax front for 2013, this is an opportune time for real estate professionals to reach out to their clients and ensure that their property and overall estate strategies are reviewed before it is too late to act accordingly.


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