Selling to a family member (or transferring to a trust?)

[Eugene Lubman]

Hi,

I am planning to sell my 3-unit investment property to my parents.  The idea is to provide them with a steady passive income in their retirement.  I will still be managing the property, as well as be an inheritor, so ideally my name should remain on the title.  The property currently has a mortgage on  it, but it should be paid off during the sale as my parents want to own the property free and clear.  Or is it better to transfer the property to a trust owned by my parents where I will be the beneficiary?  Also, I will probably want to do a 1031 exchange as I am planning to buy another investment property to replace this one.   I will almost certainly need an attorney, but I am not even sure where to begin.  What is the most pain free (and, ideally, tax-free) way to accomplish this?

Here are my initial questions:

1. Should I be looking for a tax attorney, a real estate attorney, or a trust/estate attorney?

2. The property is in Connecticut, I live in Massachusetts and my parents are in New York.  What state should the attorney be licensed in?

3. Given that my parents are elderly, what are the pros and cons of selling it to them vs transferring to a trust?

Thank you.

Gene

[Dave Foster]

@Eugene Lubman, There's a couple different considerations here.  As far as the attorney goes you may have multiple.  A CT licensed atty will need to be used to close the sale of the property.  Your parents and you could probably use a really good Elder law atty in NY as well to look at how best to structure their ownership and passing to you.

Nothing wrong with selling to a related party and completing a 1031 exchange.  As long as they own it for at least 2 years.  But you can't stay on title.  Or it will be deemed that you did not sell it.  So whether you sell to their trust or to them individually it still has to pass from you in order to do the 1031.

But even more you don't want to be in ownership when they pass so you can get the step up in basis and inherit the property tax free.