Frequently Asked Questions
How do you make money?
We're a real estate brokerage, so we make money on the commission when you sell or buy a property through us. For any properties that are outside the Bay Area, we can refer you to local agents where your property is located. We have a longer term view than most brokerages, therefore the confusion on our business model.
For clients who employ our distressed property service, we either charge an upfront commission if they will buy and hold, or profit sharing and listing commission if they wish to resell the property.
Why don't you talk about living trusts?
A living trust is a valuable estate planning tool, with the benefits of privacy, and the avoidance of probate for assets placed in a living trust. However, there are no inherent tax advantages to placing assets in living trusts, so we don't talk about them. There is a way to structure a living trust to effectively double the estate tax exemption limit, called an AB Living Trust, but there are disadvantages with respect to disposition of assets when using this trust structure.
What is a private annuity trust?
A private annuity trust is an excellent way to defer capital gains on the sale of a property, and to reduce the value of your taxable estate to avoid federal estate taxes. Prior to selling a property, you place it in a private annuity trust in exchange for an annuity contract of equal value to avoid gift tax. The annuity contract is a promise to provide a stream of income in the future. The trustee of the private annuity trust then sells the property, and the full amount of the proceeds are then available to the trust to invest. These proceeds are used to pay the annuity contract.
There are no capital gains taxes from the sale of the property, and the assets in the trust are not in your estate. There are capital gains taxes as the stream of income is paid out, but this is spread over many years, and the first payment may take place many years down the road. Typically, the beneficiaries of the trust are your children.
What is a charitable remainder trust?
Conceptually, it's the same as a private annuity trust, except the beneficiary is a charity, and a portion of the value of the trust can be used as an income tax deduction for one or more years.
What is a 1031 exchange?
A 1031 exchange is an IRS sanctioned way to trade real estate you own into another property, tax free. A forward exchange is an exchange where you sell property you own, using the proceeds to purchase another property, while not incurring any taxes. A reverse exchange is when you purchase the property to be exchanged into first, before selling your existing one. Prior to a reverse exchange purchase, accomodations need to be made with an exchange intermediary to hold title for you. Only investment properties can be exchanged, and to avoid taxes completely, the property you exchange into must be of equal or greater value.
You have 180 days to complete a 1031 exchange - if you cannot close on a replacement property within that time, then you will be subject to capital gains taxes.