Legal Question in Real Estate Law in California
Is 2012 the last year to take advantage of the low rates for long term capitol gains? I have a home bought 30 years ago for $200,000. It is now worth $1million. It is a rental property. I would like to not pass on potential high capital gains to my children when I leave the house to them in my will.
2 Answers from Attorneys
You need to consult with a tax professional and an estate planning attorney. If completed properly, an estate plan can minimize capital gains and other taxes.
Whether you leave it to them by will, or a trust which is usually even more tax favored, they will get a "stepped up" basis. That means their capital gains when they sell it will be calculated only on the gain above the value on your date of death, not what you paid for it. They may also be able to avoid property tax reappraisal, though I'd have to look that up to be sure it applies to rental property.
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