Starting a TX LLC to avoid inheritance taxes

8 Replies

Apologies if this is the wrong forum. My mom is based in PA and so is subject to inheritance taxes. She wants to buy some property near me in TX and she suggested we put her and my name on the property so to avoid any inheritance tax. I might chip in with 20% of the capital. Questions:

1. Is the above legal and possible?

2. If we don't go this route and just buy it in our names, can we still avoid inheritance taxes?

3. What type of business should I set up? At a state level or federal?

4. Is it possible to get a loan in the name of the business? I have other rental properties in my wife and my name.

5. If we don't open a business, how do we recognize the rental incomes or losses on our tax return? I file jointly with my wife and she files jointly with my step-dad.

This is a VERY interesting post!

Your wheels are turning in the right direction.  Let me offer some more ideas along your same thread, and pose a few questions.

You may want to contact your attorney and/or accountant, but how about setting up an LLC for the property that you and your mom are co-managers for? After closing on the property, you quit deed the property to the LLC, so the LLC owns it. You could be the statutory agent, which means that you would handle the day to day operations and/or be the person to accept any correspondence on behalf of the property/LLC. In the event that she passes away, the LLC will still continue to run. You could even add your wife as a co-manager to replace your mom at that point.

Also, I am not sure that taking out a loan equates to ownership for tax purposes.  Again, you would need to consult an accountant.  However, it may be possible that you and your mother obtain a loan together, but you claim it on taxes.  There is a % that you can allocate toward ownership if necessary, but in reality, if you claim 100%, then the taxes would all be based on your ownership, not hers.

@Jacob Abraham

I think you need to do more than co-buy the property to avoid the inheritence tax. In the sad moment that your she passes - she will still have a 50%(or whatever you guys agree to) interest in the rental property at which point you will inherit and be hit with the inheritence tax.


I think the next step for you guys to do is to create an LLC as Cara has suggested and have your mother gift you LLC shares every year to lower her estate.

You should definitely reach out to an attorney before doing anything though. 

If we don't set up a business,  would we be able to escape inheritance taxes by purchasing the house in both our names? 

Inheritance tax only applies to estates over 5.45 million I believe so make sure that even effects you.

Not an accountant, talk to an accountant

If the property is not located in Pennsylvania, then it is not subject to the Pennsylvania Inheritance Tax.  Here's the information I have on it:

PROPERTY SUBJECT TO INHERITANCE TAX All real property and all tangible personal property of a resident decedent, including but not limited to cash, automobiles, furniture, antiques, jewelry, etc., located in Pennsylvania at the time of the decedent’s death is taxable. All intangible property of a resident decedent, including stocks, bonds, bank accounts, loans receivable, etc., is also taxable regardless of where it is located at the time of the decedent’s death.

In the case of a nonresident decedent, all real property and tangible personal property located in Pennsylvania at the time of the decedent’s death is taxable. Intangible personal property of a nonresident decedent is not taxable.

Originally posted by @Linda Weygant :

If the property is not located in Pennsylvania, then it is not subject to the Pennsylvania Inheritance Tax.  Here's the information I have on it:

PROPERTY SUBJECT TO INHERITANCE TAX All real property and all tangible personal property of a resident decedent, including but not limited to cash, automobiles, furniture, antiques, jewelry, etc., located in Pennsylvania at the time of the decedent’s death is taxable. All intangible property of a resident decedent, including stocks, bonds, bank accounts, loans receivable, etc., is also taxable regardless of where it is located at the time of the decedent’s death.

In the case of a nonresident decedent, all real property and tangible personal property located in Pennsylvania at the time of the decedent’s death is taxable. Intangible personal property of a nonresident decedent is not taxable.

Thanks. Now need to look into whether I would have to pay tax on her 401K and who should recognize the rental income/loss on taxes.

Originally posted by @Caleb Heimsoth :

Inheritance tax only applies to estates over 5.45 million I believe so make sure that even effects you.

The OP is not talking federal inheritance tax (estate tax), he is talking about Pennsylvania's inheritance tax; PA does not exempt the first so many dollars like the federal tax does.

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