Sign Idaho Banking Warranty Deed Myself

Industry sign banking idaho warranty deed myself

all right everyone hi welcome to our fall real source university training series my name is kara mckenrick and i am the national education manager for real edgy title group uh before we kick today's class off um you may have noticed that you may have been invited by a your favorite local title or escrow company and i wanted to tell you a little bit about religious title group in case you didn't know already now miss debbie would you mind moving to the next slide for me all right so real g title group is actually the parent company of over 47 local based title companies across the nation uh the advantage of this is that agents like yourself get the technology the stability the education the partnership of working with a larger kind of global style company but the best part is because these they are local companies you're also getting that friendliness the support the expertise from partnering with a local level business and on the plus side of it all as you can see we have locations all over the map and this means when you guys are working referral business or you have out of state buyers or sellers we can do courtesy closings and we really have your back from all over the place so so keep that in mind as you're moving forward and then next slide please so the other thing that you're going to notice from us is that we basically employ and partner some with basically some of the most experienced industry experts in the business this is from real estate title mortgage and so much more and we bring all those expertise right here to you guys on the virtual real source university platform so we have some really exciting uh informative classes coming up from you that range from staging to you know testimonials and even a really fun halloween series where we're going to be talking about some title terror stories so some spooky kind of fun but yet industry-based stuff that will walk away and give you a little bit of chills but also give you a little kind of perk up on some title uh information that you may need so that's exciting and you can actually go register for these class and more um we we have our fall curriculum up now but we're going to do a new one in the new year and we'll do spring classes and so forth so all you have to do is head over to trgc.com forward slash virtual training the other thing is we've been doing these um these these trainings virtual and live for uh since about springtime when the the big kind of virtual world shifted so we have a huge library of on-demand expertise i know that melanie who is working on things on the back end she's our tech guru here at real source university she'll be putting a link into the chat box where you can go register to see some of these expertise on demand watch some of these classes and the best part is those can be accessed anywhere at any time now today's class will probably hit that um that form and be available for downloading on monday so give us some time to edit it out get it right and get it over to you um and now with further out uh further ado i am going to pass things over to real g's 1031 services group and we thank you all for being here so you guys go ahead take it away thank you kara uh this is cameron mcfadden i'm the president of real g1031 services group and i just want to thank everyone for being here and being able to attend the class we have a great agenda for you today we're going to be talking about 1031 exchanges specifically about the elements of title holding estate planning and then any vacation home questions that often come up in this world next slide please dab so first a little background on us um on who is the real g title group 1031 services it's been an evolution over the last couple of years and to where we are today we started as a small uh idaho exchange company called title one exchange and then with the relationship uh and being part of the religious title group we started to expand our footprint a little over a year ago and we used the name trg exchange and we worked mostly in the midwest in colorado specifically but now as we've we've launched our nationwide attempts to be a 1031 service provider we have adopted the real g title group 1031 services name so that it can show our relationship with our partners and give us our brand awareness throughout so it's been a it's been a long process but we want to be a great resource for all of you in this 1031 world so our presenters today are myself cameron mcfadden as i mentioned uh martin edwards and debbie faulkner and we'll go in that order martin's going to cover a few things as soon as i'm done and then debbie's going to close us out first i just want to re-establish as well what our mission is here and that is we empower our real estate professionals to strengthen our communities by delivering exceptional brand some brands support and service through the quality integrity of our people and i think you have great representatives of that today and the 1031 services that we bring i think you'll find equal or better than than anyone out there in the business so just a a little ground setting to make sure everybody starts from the same position about the very basics of 1031 exchanges 1031 is cleverly named after the internal revenue code section 1031 and it is a mechanism by which that the long-term capital gains on an asset can be deferred and not being operative or deferred into the future and not paid at the time of sale and it's important to understand how the rule reads as shown on this slide so that is that no gain or loss shall be recognized on the exchange of real property held for the productive use in a trader business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for the productive using trade or business or for investment so again that's the threshold test or the threshold elements that need to be present in order to even participate in 1031 and it's good i just want to we just want to level set and make sure that everyone understands that it applies to those two elements most of our customers come from the investment world but definitely uh those properties used in the productive use of trader business are eligible and should be considered when you're considering whether or not 1031 is appropriate for a transaction or not there are three basic types of exchanges so we're not going to spend a lot of time talking about those types of exchanges but if you have questions about them of course bring them forward but just to remind again everyone where the basics are there's a forward exchange or a standard exchange as we generally think of it and that is when you're taking one property that you sell and then you exchange it for another property that you're going to buy at a later at a later at a later time a delayed exchange and then the second type is the reverse exchange which as the name implies the operations are are reversed in which you acquire the property that you're going to replace with in 1031 language it's relinquished and replacement properties so you acquire the replacement property first and then you go through the process of relinquishing the other properties again a little bit more complex than the forward exchange in its process and its makeup but a very common uh used type of exchange today and then last but definitely not least in today's market is the improvement exchange or construction exchange and that is taking either one of the first two exchanges that i described and then layering on the construction elements of the exchange or building or doing capital improvements to a property and i think that's the takeaway i leave you with is it does have to be limited to capital type of improvements repairs and maintenance do not count in improvement exchanges it is the the full-blown capital type of uh of improvement that has to be done or uh construction that has to be done on a project so those are the the three basic types of exchanges that are done and uh we'll be talking again about all of those indirectly through the other elements that we talked about in the in the presentation today so with that i'm going to hand it over to marty to talk about title holding first okay thank you cameron and hello everybody so we're going to talk a little bit about title holding options the way you sometimes see ownership and what the different things mean uh and uh in some respects i'll also talk about the implication for 1031 but certain of these title holding issues anyway uh there's an expression called uh fee simple fee simple absolute or fee title those all refer to uh the the most common type of ownership for those of you that own your own homes or even investment properties whether you know it or not you own it in fee it just means it's an absolute ownership a lesser ownership might be something like what we would call a life estate where it's only owned for life for a long term lease there's many other types of more limited ownership but fee title is what you would see typically i think if you look at a title commitment and it shows the proposed or the actual uh party and title i think it actually references that the fee title is and so and so that's what the word fee is relating to now in terms of uh different types of deeds uh most typically property gets transferred via a warranty deed the uh the idea behind a warranty deed is just that that the seller is warranting to the buyer that the seller has good title to the property doesn't matter when a defect might have appeared in the chain of title once you're given a warranty deed you're going to be liable as the party giving the warranty deed um as probably everybody on the call knows for most if really for all purposes people get title insurance to protect themselves although i guess there's a few rural areas that still use like title abstracts but anyway uh if there was a defect on a title that someone received as a buyer they would typically go back against the title under the title policy and really not under the warranty deed but it's uh historically still given now there's something else called a special warranty deed and what that says is that the seller is warranting to the buyer that this nothing happened during the term of the seller's ownership that would affect the quality of the title but it's not necessarily going back and saying i'm going back for all time and warranting to you that the title is good we sometimes give special warranty deeds in a reverse exchange context because as cameron mentioned before when clients need to buy the new property first they uh uh have we we have to acquire in their behalf and then when the reverse exchange is ready to be wrapped up we d the property back to our client and so we do that by special warranty deed because based on the nature of our relationship we're not in a position to warrant whatever happened historically now another type of deed is a quick claim deed and again it's a little bit what it kind of sounds like it's just uh it's you think of it as is deed so it's just basically saying whatever i have if anything i'm giving to you but i'm not making any representations that sort of quality of title now there's a lot of different ways that people would typically hold title that you'd see on uh in different situations again it's somewhat relevant specifically for 1031 because there's a thing called the same taxpayer requirement which means that the same taxpayer entity legal entity tax entity identity um has to sell the relinquished property and buy the replacement property so if you kind of switch into some of these different uh ownership structures mid-stream it could cause a potential problem anyway the most typical type of ownership at least at a individual level is a joint tenancy and you probably all know that grants rights of survivorship to the to the co-owners that are members of the joint tenancy it could be a husband and wife or it could be a group of people and if anyone dies their interest gets split pro-rata with the other survivors and it's considered you don't own the right half of the property or the left half you own an undivided interest in the whole the next type of situation is a tendency in common and we again work with this a lot in the um in the exchange world again that means that each owner owns a pro rata share in the hole but there's no rights of survivorship and so if attendant in common passes away his or her interest goes into their estate now there's something else called tennis by the entirety this doesn't go back all the way to english law like some of these other things do uh but tennis by the entirety is for married couples and it allows them if they hold it in that format to be able to shelter the asset from liabilities that they might incur and so it's a helpful thing um as far as i've always known it's only for uh personal residences although i have a current new client from florida and he's told me that if it's titled that way at least in florida that any asset can be subject to tenants by the entirety if it's owned by the spouses um debbie might be able to comment on that later if that's uh accurate or not as a florida attorney uh now the tendency by the entirety also has acts as a joint tenancy so if one of the uh tenants dies it does automatically go to the survivor one of the differences though with joint tenancy is that if i a joint tenant i could take myself out at any time unilaterally but if you're attendance by the entirety you're kind of stuck with it so unless the spouse is mutually agreed uh separated uh or there's death divorce or court order there's no other way to take take yourself out of the tendency by the entirety now uh revocable trusts are very very common these days and have been for for a long time and a lot of times titles held an irrevocable trust and the word revocable means just that that you can revoke it at any time and there's a lot of different names for for the these types of trust sometimes they're they go by living trust grantor trust or self-declaration of trust and um basically what happens is that the owner of the property transfers the asset while he or she is living into the trust and then continues to hold it for his or her benefit uh upon the death of that person though the trust that is held on an ongoing basis for the benefit of the other people that are listed in the trust as successors while the person's alive they can change it revoke it alter it do anything they want but it becomes um etched in stone once they pass away and um think of it this way uh when you transfer your asset into the trust and you die the trust hasn't died and the trust is the owner of the asset and so as a result those assets are not part of your probate estate probated states are only for assets that you you own personally when you die so that's one of the many benefits of living trust so that people can avoid probate when you die you simply look to the next trustee uh the next thing is an irrevocable trust uh again like the name suggests it can't be changed once it's uh set up sometimes i use it for asset protection or for uh for um tax purposes there's gonna be some estate planning implications again that's kind of debbie's specialty and she can make touch on that later um next one is what we call a marital trust uh that's a trust that generally uh it gets established under the living trust so it says that uh upon my death if i'm the husband uh based on a certain formula some of the value of the assets will be dropped in automatically into the marital trust to be held for the benefit of the surviving spouse and the balance of the assets will go into what's called a family trust for the benefit of the rest of the family and the benefit of of doing these types of uh estate planning uh vehicles is that among other things you can double the federal exemption from tax when you die by using these types of trusts with the marital trust and the family trust so debbie i don't oh i guess you're a mute but i forget what the federal exemption is before you have a estate tax if you can unmute for a second um the federal exemption amount is 11 million per person index to inflation so currently it's over 24 million for a couple okay so anyway those rates are much higher t an they were historically so the ability to kind of double the exemption through these trusts was much more important when these rates were lower then you've got uh land trusts it's another type of trust think of it as just a living trust where the only asset in the trust is actual piece of real estate um the uh it's a simple way if somebody's got a lot of assets they want to pass it on to their family they can do it through a living trust but if their major asset is just real estate it's just a simple kind of shortcut way to accomplish the same purpose the trustee can be a trust company or bank or or an individual you can even be the trustee of your own your own land trust not every state has land trusts uh florida has them illinois has them where i'm located and maybe half a dozen others but not everybody has them also there's a a thing in uh section 1031 in the code that has a prohibition against doing exchanges of beneficial interests and if people have their property and land trust uh their interest is known as the beneficial interest so in 1992 uh people wrote into the irs and said this is a problem for people that have land trust and the irs said we understand and that wasn't the intent by restricting exchanges involving beneficial interests and so they gave a green light to people doing exchanges out of out of land trusts the next is what's called a testamentary trust and that's one that actually arises under somebody's will so for instance if you've got a handicapped child or or other special needs situation the will might say that instead of just giving it to that person outright a trust is created automatically under the will in order to kind of protect that person uh now on the business side uh you often see title held in limited liability companies as you probably know by the name or just from your own experience the whole purpose is to limit the liability to the value of the asset if you have in your own name liabilities unlimited if you have it in an llc it's limited by that asset it's very common for real estate investments there could be two types of llc's one could be a single member which just means there's one owner and that's actually treated for tax purposes as if the same as the individual himself or herself but if there's more than two members even if a husband and wife that is a uh considered a partnership and needs a separate din so um uh and again that's one of the 10 31 issues we come up to sometimes where a husband and wife will sell individually but they'll buy their investment property and they want it for their liability purposes set up put a put it into a two llc between them you cannot do that because you don't have the same taxpayer you're going from individuals to a partnership in this case an llc is considered a partnership there's also something called series llc's not every state has them but they're very convenient you can set up a master llc and then let's say for instance you have five different pieces real estate ownership uh parcels you can have a separate little series llc underneath it to insulate each of those from from the other um not all states have series llc's i think i mentioned that illinois has them where i am i don't think florida does i think we've talked about that in a prior webinar c corporations are another way that sometimes titles held but that's usually by a a larger company corporation it's not very uh good for just for uh real estate investors themselves so you don't typically see it that way and last is a subchapter s corporation uh that's somewhat more typical and that's uh you have the benefits of the corporate shield and that type of ownership and you can report it on your own personal tax return which is the benefit but it's also a little unwieldy and um it's generally not advised for people that are doing uh uh real estate investing but that's kind of the gamut of all the different types of ways that titles held and uh on that note i'll turn it over to debbie and she can talk about some of this the estate planning issues debbie please take yourself off of mute hello my name is debbie faulkner i'm an estate planning attorney in florida and i am going to discuss what estate planning is and go over a little bit about how this relates to 1031 exchanges so estate planning is a general term that encompasses a will a trust power of attorney your health care directives like living will preening guardian beneficiary designations and insurance planning it can be a combination of any of these things or it can be just a couple of these things estate planning just a general term that covers all of your advanced planning for when you become disabled or if you pass away who needs an estate plan i often hear in my practice people say well i don't have an estate i just have a few things anybody that has any assets whatsoever needs a plan because if you don't have one each state has a default plan for you and this often contradicts what you actually want to happen to your stuff if you pass away in an accident so an estate is a general term that covers anything you own that means your house or car any parcels of real estate any businesses llc's you might own anything that has value that that is what your estate is so if you want to make sure that you know where it goes when you die you need to have a will or trust in place so real estate has special considerations that are unlike any other type of asset because they are illiquid and so the goal of having real estate we want to make money off of it but we want to make sure that if we own real estate we have a transition plan in case you unexpectedly pass away and we also want to make sure that you aren't subjecting yourself to liability in the meantime while you own that real estate you know as well as i do that a lot of investors initially put real estate in their personal name and then rent it out to renters and estate planning attorneys will uniformly advise against this because if somebody does something has an accident on your property they're going to sue you in your personal name if that real estate is held in your name so we want to balance asset protection and also having a transition plan if you own real estate in your portfolio of assets so the ultimate goal is to transfer your property and everything to the next generation with the lease tax consequences and to make sure you maintain that protection during your life so i thought it would be best to explain by example so i set up two situations so situation one you have a client in this the case we have sarah she's 29 years old and she's single she's saved up a lot of money from her primary job and she's considering purchasing her very first residential real estate what should she be thinking about so like i said we have dual goals we have estate planning to make sure that if something happens to sarah her family gets the benefit of her investment just like you would with an ira and have a beneficiary designation we want to make sure if she something happens to her her real estate gets passed along and we also want to protect her from creditors and other claims so um just like people put insurance on their property to make sure nothing happens to it an estate plan is a type of insurance to make sure that your your rightful heirs or your kids or whomever business partner gets access to that real estate uh if something happens to you so this goes back to what marty was talking about earlier as how is she supposed to title it and as you know working in the title world is a myriad of different ways that you can title the asset in this case you know i wanted to compare if sarah puts it in her individual name versus if she puts it in an llc name so if sarah buys the house and puts it in her own personal name and she you know goes and gets run over by a car and passes away it will pass through will which means that it goes through probate court before it goes to the beneficiaries of her estate so a lot of misconception uh you know is around the concept of what a will does essentially if you have a will and there's assets that are in your personal name and something happens to you the court gets involved before they go to your rightful heirs or beneficiaries in a will they're called beneficiaries but a lot of people use those terms interchangeably so um that you know in order to avoid going through the court process that's where trust comes into play when assets go through a trust instead of a will they do not go through the wills court or the probate process when before going to the next generation so that's one of the reasons that people have trust instead of wills is because trust avoid the court involvement and passing along their estate so also the second reason why she might want to not title the house in her own name is the exposure to creditors as i just mentioned earlier some something happens to someone on sarah's rental real estate they're going to sue sarah personally if it's in her personal name which means any asset that she has that's not otherwise protected under the law is exposed to a lawsuit judgment so somebody trips and falls because there's a hole in the yard um they're gonna sue her if they win everything that she owns could be subject to judgment on the other side of the screen is what what i would recommend almost uniformly is putting in a company um most in florida it's best to put an llc most states it's the same i'm admitted to law in four different states and i would say limited liability companies are generally the best because they provide a liability shield so if somebody does fall on that property or get injured and they win a judgment they're winning against the llc which is holding just one asset which is that rental real estate a lot of times people put two or three properties into an llc you just have to be aware that if you do do that that all three would be potentially subject to a judgment creditor if somebody fell on one of them and sued the company every asset the company owns could potentially be lost and then again the llc can be titled in the name of her trust so instead of her llc being owned by sarah it would be owned by the sarah revocable trust or sarah trust you can name your trust whatever you want and that way if she did die instead of going through court her llc would just be able to be taken over by the trustee of her trust which is the same type of concept as an executor of a will so this is kind of what it looks like she creates she buys the house she names uh she puts the house in the name of atlantis one llc and then sarah's revocable trust owns her llc a lot of times people think that the manager of an llc is the same thing as an owner it is not the same exact thing a owner of an llc is called a member and the manager of an llc is the person that is in the public records that is allowed to sign bank documents take loans etc so if you do buy an llc you have to be the person who's named on uh as manager of the llc is the person who has to go to the closing but they can be different people this kind of comes into play sometimes if you have um i've helped some nfl and and bill mlb affiliate people that want privacy sometimes they own an llc but they have somebody else in the records in public records so that nobody knows who the true owner is and that goes back to also land trusts a lot of investors use land trust land trusts can also provide privacy for people that are famous okay so this is how it ends up working um when you when she goes to sell the property so if she bought her rental for a hundred thousand dollars and a property appreciates in value to 200 these are two different ways that she can dispense of the property and this is where 1031 exchanges come in to increase your overall estate value which helps pass along the most your beneficiaries if she decides to sell and it's worth two hundred thousand dollars she has a hundred thousand dollar gain assuming the federal uh tax rate of 25 on the left side you'll see that she has net 175 000 if she uses a 1031 exchange and buys another piece of real estate she has the entire amount of the sales price to apply towards a new property so that's where 1031 exchanges when used regularly and often can really help increase your overall net worth so like to sum up sarah she needs to be thinking about what taxes and fees she's going to pay she should be thinking about in the future about what you know using 1031 exchanges and by setting up the structure that we set up there's a lot of flexibility in using that structure if the llc owns the parcel of real estate the llc can change owners but the llc is still the owner of the real estate for purposes of the exchange okay another scenario is uh betty and bob so this is a married couple and they're older and so they're seasoned and they hold a whole bunch of real estate we're going to assume 25 properties and they have it titled all over the map so they have some in llc some in landra some is joint tenants so they are titled in different manners the best thing to advise for a seasoned real estate investment couple is that to continue to use their 1031 exchanges to hold their real estate until death the reason that this helps is because if they don't need access to capital and they don't need access to the underlying value of the property if they can continue to hold the real estate and exchange it in 1031s until they die then their family inherits the all of the property at the date of death value so i recently had a client come in who bought a property 25 years ago in colorado a significant appreciation was built into that property they brought it at a very low price and had approximately 350 000 of appreciation um if they were to sell that property they would have to pay capital gains on the 350. but the couple said we really were very far away from the property it's hard to manage we just don't want to deal with that anymore you know if if they were to use the um 1031 exchange process they could get a property that's closer to home that they can easily manage and they will be able to shelter those gains and if they when they pass away their kids would inherit at the date of death value and pay no taxes on those gains so here's some kind of an example and you can visualize and see we assume that baba betty purchased the rental uh property green acre for a hundred thousand it's now worth 250 so we got 150 000 dollars of gain it's far from their house they don't want to manage it anymore if they purchase a new property that's worth the entire amount of their old property and they pass away their heirs get to inherit at that date of death value no matter how much it's appreciated and the heirs don't pay any taxes on that whatsoever whereas if they do not use the opportunity to 1031 then they're going to pay capital gains so again another reason another way that this involves estate planning is no matter how bob and betty have their real estate title now they need to title their assets in a trust if they're going to efficiently pass along their real estate to their heirs so if you own an llc that can be titled in the bob and betty trust which means it has a plan in place for what happens to it after bob and betty passed on the left side and the reason i uses this example is because a lot of times people own real estate in different states if bob and betty held the real estate in their own names as joint tenants or in some way directly bob individually betty individually then if they die they have to have a probate a probate proceeding a court proceeding in both new york in my example and los angeles whereas if they hold it and trust there's just one trust administration it's handled by the trustee the person they name in their trust to take care of their business and those properties can be bought sold exchanged by the trust without having open court proceedings in multiple states as you might imagine court proceedings in multiple states involve attorneys in multiple states and under florida law attorneys can just take a three percent off the top of your estate uh with w and the court of the law directly allows for that and it also allows for attorneys to bill significantly more amount if there are complications like you know different assets differen types of asset classes so in order to minimize the legal fees and the taxes that your family will have to pay if you pass i advise setting up a revocable trust that way you can a revocable trust means that bob and betty could change it until the day they die so if they had a falling out with an heir or something of that nature they could change their trust but if they do die we have a succession plan that avoids all those court proceedings and now i'm going to turn it back over to marty who's going to discuss exchanges involving personal residence or vacation houses yes uh thanks thanks debbie um yes as cameron mentioned in the introduction uh there's a lot of people that uh do exchanges where either the property itself might have been a a personal residence at one time and then over time it got converted to an investment property now it's eligible for an exchange or conversely uh they use it as an exchange property historically uh but then eventually converted to their personal residence and so there's a a lot of rules for what you can do and what you can't do so i want to go over some of those in the next few minutes so the first example is a situation where the property was formally used as a personal residence or vacation home and then converted to investment property and so it's okay it's eligible for exchange treatment if it was held as an investment property for 24 months prior to the sale at least 24 months also it's required that during each of the prior 12-month periods of in those two years the property had to be rented for at least 14 days or more at a fair market value now generally in the exchange world there's a lot of things you cannot do with related parties but this is one situation where it really doesn't matter for this fair rental market rental purposes if you're renting it to a family member or a relative so that that does that does work sometimes you'll see a child will go to college and the parents will buy an investment property for the child to live in as opposed to be paying for a dorm and as long as the daughter pays rent even if the source of rent is a gift from the parents uh that that will still fly anyway um the personal use of this property in this example um had to be limited to the greater of 14 days or 10 percent of the days it was rented so you can't convert this personal residence or exchange property and then kind of use it on and off in between the times when you're renting it your personal use is gonna have to be limited and um there's also the ability uh to have a few more days of use if it's specifically in connection with doing repairs and maintenance at a property now the second example is um just kind of the opposite now you're doing an exchange and you're buying a something that you want to use as a future uh vacation home or personal residence but at least at the time when you buy it you were buying it as a investment property and uh really the rules are exactly the same it's got to be held for investment for at least 24 months after the purchase uh it's got to be rented out for fair market value just like i mentioned on the other slide you could be a family member and again your personal use is limited just like it is in that in the other example now the third example is a uh when you have a uh you're selling a personal residence when there was both a personal use in it as well as an investment use so for instance uh maybe you have a uh a coach house or maybe you have a two flat or a three flat where you're living in one unit but the others are rented out and so um in those situations if the property was used as a personal residence for at least two of the prior years you can use the general 121 exemption section 121 which probably all of you if you're if you're in the real estate field probably know that uh that allows a an exemption from gain for 250 000 for a single person or five hundred thousand dollars for a married couple uh but if the gain exceeds uh those limits of 250 or 500 000 then you can uh do a 1031 exchange for the balance and shelter the the balance of the gain that's above those those levels now lastly we have a situation where we're selling up uh a former exchange property but that's now being used as a personal residence those rules get a little bit tricky so what what the rules say is that you take the prior five years use i mean you take the prior five years use and you calculate the period of time that was held as an exchange property and the rules say that's the numerator and you uh take the entire period that the property was held that's the denominator so you're gonna have to create a fraction here and so the resulting fraction or percentage is applied to the total gain and the dollar amount that comes from that multiplication is is not eligible for a section 121 deferral so i'll give you example you take the example of a property owned by a taxpayer for seven years prior to the sale three of which were used as an exchange property and four were used as the taxpayers personal residence so that fraction then becomes three sevenths and let's assume that the gain on a sale was 200 000 you have to multiply that by the fraction of 3 7 and that would give you 85 seven hundred dollars that would be the taxable amount based on that scenario so i don't know if there's another slide because i can't see it debbie um is there another one on there with the caption this is the uh okay this is this mixed-use property that's partially residential and parts partially uh investment so this would be something like a maybe you have a home office that you're using as a psychiatrist or a psychologist or as i mentioned before a uh maybe as a coach house or other units in the in the overall property that are being held as uh investment and so you can kind of bifurcate it on the closing statement and you can take the 121 exemption for the part that's being used of your personal for personal use and you can do a 1031 exchange for the balance of it that's health for investment purposes sometimes we have a farm for instance where someone's selling the farm but they live on the farm so you have to calculate the value of the home that's on the farm and that's a 121 then you take the rest of the property the farmland and allocate a value to that and you can do an exchange of that portion of it because that's an investment property so i think we're right on the money with the time we're hoping to wrap the presentation up at least the formal part at this time and now i think we're going to open it up to owen to see if there's any questions that have come in yeah thank you very much marty and deborah this last slide for anyone that's looking at it just shows our contact information please feel free if you have any additional questions that doesn't that don't get hit today or answered today please feel free to reach out to us at any of these contact points and we'd be happy to help you let's go ahead and jump into some question answer if you have a question please feel free to go ahead and post it on that q a page and we'll go ahead and try to get to it the first quest first question will be directed toward debbie and debbie this question is if you buy a home for a disabled person who has a special needs trust what type of title do you think should be used for it or how would you title it that's a great question if you buy a home for a special needs beneficiary it depends on whether you want the proceeds of that home if it's ever sold to go to that person or not with a special needs beneficiary you would want to either title the home directly in the special needs trust which avoids having the proceeds ever in that individual's name the key with special needs is that the individual that's receiving the disability payments or or other such government benefits cannot own any property um usually over a thousand dollars without subjecting them to possibly losing their benefit so the you also could potentially buy the property in an llc and lease it to the special needs trust it depends on where you want the the um it kind of depends on your goal um if your underlying goal make sure that that person has money on an ongoing basis or a home to live in um you would want to put that in the name of the special needs trust and that way if it's ever sold your special needs beneficiary has money in that trust to care for their ongoing care at a different location awesome thank you debbie and i'm going to go ahead and send this next one to you as well just through your experience is there any verbage that a bank may require to ease the process of placing a property into a trust uh so no the bank cannot prohibit you from putting your property in trust there is a uh there's a law that got passed in the 1980s and i don't remember the entire name of it but i think it's called the saint germain part of it is called saint germain act i can't remember the remainder of the name off the top of my head but it prohibits the banks from uh making any rules against you putting your property in trust so you can always name it in your trust without having any issue with your bank or mortgage company awesome thank you so much debra this next question i'll go ahead and direct towards canon mcfadden cameron the question is can you sell your homestead property that's in an llc and put that into a 1031 exchange so if you're going to sell a property that you've held an llc the question would become is what have you been using it for it was it your residence or not if it was not the residence then yes you can absolutely use that in a 1031 exchange awesome and then i'll give the follow-up question to you as well cameron um is there a benefit or is there a way to put every single property that you own into let's say multiple 1031 exchanges or in multiple llc's rather uh yes so you can have and it's very common for people to have what would be called what i think of as a single purpose llc in which they hold each individual property in separate entities to help silo the liability for those entities or potential liabilities in those properties so you can absolutely have as many llc's as you want the thing to remember here is that we do need to maintain that taxpayer and so we would be in my world be thinking that those are going to be disregarded entities more often than not where our taxpayer is the sole member of that entity holding title to the individual property but you can definitely have more than one entity and again it's very common and good practice to do so thank you cameron marty this next question will be directed towards you uh the question is that a 1031 exchange should only be used for investment property correct what happens if you are if your homestead property is moving however uh it says what sorry what if your homestead property is the property that's being sold but you're moving into a new property are they taxed then i'm not sure i understand the question oh and unless maybe there's something i'm not getting in it you can't do an exchange homestead property so i i believe that is the question there marty can you do a 1031 exchange from a homestead property if you're moving from it into a new homestead and uh just further clarification on what that investment property requirement is no i mean under 1031 the property that you sell and the property you buy you have to be either held for investment or for use in a business or trade and so by definition uh trading out of a homestead or into a homestead is not going to be uh relevant um before you take the next question uh i would mention that i was in the middle of my career in the 80s and so i remember the garn saint germain act named after the two uh senators that passed it debbie probably wasn't born born then but uh i'll leave you with that thought until we hear the next question thank you so much the next question i'll also direct your way marty can a homestead property be exposed to creditors well it can unless it's held by tenants by the entirety because uh uh yes it's a it can be uh generally available to creditors so if you're in a high risk profession like uh let's say a doctor where you might have malpractice litigation things like that it's very important to either hold tenants by the entirety or if you use the land trust for instance uh you might be able to get some um shelter and there's some other trusts too that more of the complicated ones that debbie would be working on but uh the answer to the question is yes it does leave you to liability awesome thank you marty um cameron i'll go ahead and direct this next one to you the question is if we own a rental property with two other individuals as tenants in common and want to sell as a 1031 exchange what all parties have to do the 1031 or could the other two parties pay their gains and just invest and then one person just invest their portion into a new property using a 1031. that's a that's a great question and one that we come across a lot uh so if you're holding property as tenants in common so it'd be like cameron as a 50 owner and owen as a 50 owner in property then we are free to transfer that property and either one of us could do what we wanted in terms of doing exchange so i could do an exchange on that sale for my 50 interest and you could um not or you could do your own exchange uh i think the wrinkle to be to kind of draw into this is if we held this property together as an in an entity then it gets a bit more complicated because then we're running into our taxpayer problem of making sure that we have the same taxpayer doing the exchanges but in the purest sense of the question yes if we're holding it as pure tenants in common then either of us can do what we want as part of a transfer in terms of doing a 1031 or not doing a 1031. thank you cameron i'll direct this next one to you as well the question is is there any issues with doing a quick plan deed at an investment property that was acquired through a 1031 exchange in an individual name is there any issues with quick claiming it into the llc with that person being the sole member of the llc another great question that goes right with ours no generally not for that purpose that are there's no problems using a quick claim deed to transfer your property for that purpose thanks cameron um i'll go ahead and direct this one to marty marty the question is um just on the the foundations of the 1031 exchange it says if i sell property in a 1031 exchange can you expand on how or if that capital gain is deferred well yes if you there's an expression that we all have we're calling uh trading up or even in value so yes as long as you do a 1031 exchange and you buy something for equal or greater value than what you sold you would get indefinite tax deferral until you either sold that property later or did future exchanges you continue to get deferral and the deferral would be for capital gain uh recapture of depreciation state tax sometimes there's obamacare or medicare tax so all of those things would be deferred if you did a typical 1031 exchange awesome thank you so much marty i'll also direct this next one to you as well it's a two-part question one can you do a 1031 exchange that on a property that's your primary residence and then the second question is can you do a 1031 exchange um in selling from one state and purchasing in a different state that is a pretty common question at least the second one as i mentioned before relinquished property and replacement properties both have to be held for investment or in connection with a business and so forget personal residences you can't sell them in exchange or buy it in an exchange the second question was the other states and again this is all based on federal tax law section 1031. and so it does not matter at all what state that you sell in or what you buy and they don't have to be the same state you can go you can go anywhere across the states a few states don't have a state tax deferral but that's another question you can still do an exchange and get the federal uh deferral thank you marty deborah this next question will be directed towards you the question is are there any differences in mortgage qualifications or the process with a trust owned or llc property i think if i understand the question right there the qu stion is whether mortgage companies treat llcs and trust differently than individuals the answer is yes llcs obtain commercial mortgages which usually have shorter shorter loan ter loan terms from the typical residential real estate is 30 years typical commercial mortgage is 20 years so it can vary on both of those depending on what terms you agree to with the bank through a revocable trust or living trust which is the same thing they look at you individually as taxpayers because whoever creates the trust it it is essentially like having a shadow of yourself so i debbie faulkner have a social security number i have an identity if i create a trust and put my home or my property in the name of that trust and it's revocable um then then that trust essentially has my social security number also it's like having a shadow of yourself you aren't treated differently from your trust because you can take things in and out of the trust by moving the title so for example if i were to own my residence in my trust name i want to sell it instead of selling as debbie faulkner i sell as debbie faulkner trustee of the debbie faulkner trust but i am the same person and and um so if if it's in a revocable trust the mortgage requirements would be identical to the mortgage requirements holding individual and if you're trying to purchase in the name of an llc your llc would be evaluated if you have just created the llc for purposes of holding this real estate mortgage company is going to look at you individually as the personal guarantor of the mortgage and the the company itself will decide whether it permits you to own title in the llc or whether it will require you to have the title in your individual name thanks daddy cameron we're going to go ahead and switch it back to you for this next question it's really a scenario um the question is that my clients who own an investment property are considering to sell it and purchase another property it's appreciated by fifty thousand dollars their accountant said it's maybe too complicated to use the 1031 exchange program they may need to hire an attorney for it and it may not just be worth it i think the question is asking when is it worth to do a 1031 exchange yeah again great question that needs to be asked uh every time and i would say if you're only talking about fifty thousand dollars of the game you're right again you're right on the cusp of whether or not it's going to be uh worth it or not so that's uh the the variables that a person wants to look at are what what what rate of get gain or capital gains rate are you at uh the basic one that most of the world lives in is 15 and then as marty and others have said we do have the other taxes that can apply if you're in the other tax brackets so a quick calculation of what the tax implication would be would be the first step and then comparing that to the costs of the exchange that you're going to incur based on the company you're using um so that's that's the the test that we usually have ask our clients to run through is ask them if if it just makes sense from a dollars and cents standpoint based on the projected gain that they're going to have and again 50 000 is right there i would say most of our customers would be doing it at that at that threshold uh but you know again it's worth asking the questions and doing the analysis at that point thanks cameron and marty i'm going to send you the last question as we're running out of time um it's really a kind of a two-part question i'm going to combine a couple into one is it possible to do a 1031 exchange where you buy and build on a lot and is it possible to do a 1031 exchange for a contract for deed scenario okay those are two unrelated questions but um i think cameron when he made the introductory remarks i believe he referred to a construction exchanges or improvement exchanges so there would be an example exact example of what you're talking about so uh although he didn't have time to elaborate oftentimes the sale value of the old property is way more than the purchase of the lot for instance for the new property and so in order to kind of get the additional value into that new property so that you're trading equal or up in value yes the construction uh process would take you there again cameron mentioned earlier that they're a lot more complicated but they're done very frequently because people can spend five six thousand dollars for that type of complicated exchange and be able to defer hundreds of thousands so it's well worth it um also the second question was installment agreements or articles agreement for deed and yes you could sell under articles or installment agreement and you can buy that way the only problem is that let's say you sell something under an installment agreement where your buyer gives you certain money down and you're financing the balance of the purchase price don't forget for exchange purposes you have 180 days to roll over into the new property and so if you're if it's not monetizing you're holding that installment agreement and it's going to be paid over five years or ten years then it's a practical difficulty the answer is if you have the resources you can invest your own personal money into the new property equal to the balance under the installment agreement and get your deferral and then as you get the money back from the client over time it's still tax deferred awesome thank you marty and i think that um marks the time where we do have to wrap up thank you everyone who's joined us today for our webinar on investing without taxation if you have additional questions please feel free to reach out to any of us or through our contact information and everyone have a great day thank you very much and from all of us here with the religion title group i just wanted to thank cameron deborah martin and owen for joining us today with that terrific information and also wanted to thank everyone in our audience for joining us and we'll see you all next time you