In this weeks edition of Speaking of Settlements, I review the concept of structured sales, updated for 2013 and the market and tax issues we are facing this year. In this brief tutorial I look at the issue of how a structured sale works, the benefit of tax deferral and putting 100% of the proceeds of a real state sale to work vs paying a huge tax bill on the sale of appreciate real estate.
In the process of a structured sale there are a few key items you need to watch out for given the issues we face in 2013:
- Have you notified the buyer of the property of your intention to structure your sale and provided them the necessary paperwork, information and process that they will need to sign off on to make it work.
- What funding options do you have for your structured sale? As mentioned in our earlier commentary, the recent decision by Allstate Financial to close their structured settlement division has left a void in the annuity funding option for structured sales. Do you want to wait for a life market to enter the arena or does it make sense to look at private funding options through other assignment companies?
- What are you trying to achieve with a structured sale? Is it about just moving money from one tax year to the next, in which case we argue you should NOT be using this process, OR, are you seriously considering a long term cash flow plan using 100% of your proceeds so that your tax hit is spread over many years and is integrated into your business, financial or estate plan?
Regardless of your situation, we think you need to stay current on structured sales, know how they work and what you need to do to make them part of your real estate selling strategy. Subscribe to our page, like us on Facebook or simply watch these posting for more information during 2013 on the topic of structured sales.