Estate Planning

Owning Tenant In Common property may offer advantages when considering estate tax. Careful estate planning can minimize taxes significantly and facilitate smooth wealth transfer to TIC investment heirs.

From an estate planning perspective, the heirs of a TIC investor can benefit from the following tax advantage:

• Avoiding capital gains by holding on to appreciated property
• Resuming depreciation expense when property is assessed at stepped-up basis
• Upon sale of TIC with no exchange, heirs would pay significantly less capital gains tax because of the revaluing of property on date of investor’s death.  If the original investor had made multiple exchanges, all of the appreciation gets set back to zero on date of investor’s death.

A TIC ownership interest in real estate can be purchased, sold, gifted, willed, or inherited, and is subject to income, gift, estate, and inheritance taxes in the same way property held the simple individual ownership.  Upon death of a tenant in common, his or her interest in the property passes through inheritance as directed in the investor’s will or trust.  The interest does not divide among the other existing TIC owners, as there is no right of survivorship.  TIC interests do not avoid probate.

TICs may be bequeathed to one or more heirs through the use of a trust, limited partnership, or a limited liability company.  Although not required, these forms of holding title can be used for a number of estate or business planning purposed in directing the transfer of wealth in the estate.

It may be important for TIC owners to consider the illiquidity of a TIC and therefore if the appointed heirs will be appropriate owners.  For example, does the heir understand the investment?  Is he or she going to need the cash from the investment soon?  If a TIC interest were held in an LLC by three or four relatives, each one would have to negotiate with the other entities in the LLC to buy out their interest?

AMBAR Financial Group does not offer legal or tax advice. AMBAR encourages clients and visitors to seek independent legal and tax advice from competent professionals to discuss their personal financial situations. Registered Representatives may only transact business in states where they are registered, or exempt from registration. Currently we have Representatives registered in: AL, AZ, CA, FL, MN, MO, PA, TX. If your resident state is not listed, please contact us at 408-379-6510. Under normal circumstances, securities licensing procedures for additional states may take 24-72 hours. We will not effect or attempt to effect securities transactions, or provide personalized investment advice to, or communicate directly with residents in a state in which a Representative is not registered.

Property photos shown here are being provided for educational purposes only, to illustrate the different property types available in the real estate market. These photos are not intended to represent any particular type of TIC offering nor are they intended to represent any current or future TIC offerings.