Death Taxes and How to Lower Them

A death tax is a tax on a property transfer (after death) typically for estates
larger than $12.0MM. This number may change if and when Congress
doesn’t renew Trump’s Tax Cuts and Jobs Act, but the hurdle could still be at
least $5.0MM. In essence, large estates can potentially get taxed four times
– one, on the assets in the estate by the federal and some state
governments; second, on the assets received by the beneficiary at the state level and third, on the incomes generated by the assets at federal and/or
state levels.

There are 2 components to the “death tax” – one, the inheritance tax, paid
by the beneficiary who inherits an estate and two, an estate tax, paid on the
property and assets before the fact of transfer to a beneficiary. The estate
tax is typically paid to the federal government (up to 40% of the estate)
AND to 12 states. These states are: DC, Oregon, Rhode Island, Vermont,
Illinois, Minnesota, Maine, Maryland, Massachusetts, New York, Washington,
Connecticut, and Hawaii.

Luckily for NNN investors, the federal government does not levy inheritance
taxes. However, a few states–Maryland, Pennsylvania, Nebraska, New
Jersey, Iowa, and Kentucky–still charge inheritance taxes to beneficiaries,
excluding spouses.

In 2022, if an NNN investor has $12.0MM or more in their estate (higher in
2023), they can lower (or avoid) their “death tax” burden by: either, by
placing their estate in a specially designated trust, or by giving away their
estate prior to death to reduce its dollar value below $12.0MM, or, by
making a qualified charitable donation, etc. Details below:

Reduce the size of your estate: a combination of a spend-down and transfer
tax strategy that ensures a solid inter-generation transfer of wealth and
allows for a luxurious lifestyle whilst alive. NNN investors could consider
using the unlimited marital deduction. This amazing provision in the tax code
removes both the federal gift and estate taxes on estate transfers between a
married couple;

Charitable deductions: deduct contributions from an investor’s triple net
lease asset portfolio to select charities;

Transfer your properties to kith and kin, whilst living: but NNN property
owners should keep in mind the cap of $12.06MM (double if both spouses do
so) in 2022 and slightly higher limit in 2023. Consider the use of the Unified
Tax Credit. This is a dollar for dollar tax credit that combines gift taxes with
estate taxes to decrease the tax bill of a triple net property estate;

Use special trusts: by setting up a tax stratagem such as a GRAT, a version
of an living trust, the property in a NNN portfolio gets tax sheltered, whilst
the income generated and distributed from such a trust can be used for an
investor’s or next of kin’s lifestyles at lower rates of taxation.

Thus, it may be beneficial to consider suitable NNN properties without estate or
inheritance taxes, and in one of eight states with zero income tax, and zero
capital gains taxes. These states are: Texas, Washington, Nevada, South
Dakota, Wyoming, Alaska, Florida, and Tennessee.

For a national selection of superb, tax-advantaged NNN net lease investment
properties, call on your expert nnn advisory team at the Triple Net Investment
Group, led by broker Robert Gamzeh, 202-362-3050 or email robert@nnnig.com.

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