Tax implications are around every corner when it comes to estate planning. Not only is there estate and gift taxes to think about, but also income and capital gains taxes to consider. The way one disposes of items in one's plan can trigger different tax consequences, and it is important to consider all possible scenarios when setting up one's plan.
In our previous article, we began discussing various things a person would want to take into consideration before entering into an arrangement in which one purchases or accepts a gift of property from another while allowing the donor or seller to continue living on the property till death. We already mentioned that, if the property is left under the person's will, there will be questions of inheritance tax. If the property is gifted or sold as less than fair market value, there will be gift tax considerations.
A recent article in the Star Ledger described the situation of a disabled man who left his home and property to his cousin in his will, and later wanted to sell them to his cousin at the lowest price permitted by law, and live there until his death. The disabled cousin proposed to pay utilities, property taxes, and expenses for the interior of the house, and to have his cousin maintain the exterior of the home and property.