by Philip D. W. Hodgen
Imagine this. You’re rich. Oh, come on. Not THAT rich. Say, $5M or so, all in—house, pension plans, life insurance, furniture, cars, and antique electric can opener.
Imagine that you have an apartment building worth $1.5M, that you’ve owned forever. It generates $150,000 a year of cash flow—nice to have, but you really don’t need it. And everything you don’t spend is just adding to your kids’ estate tax problem, anyway. (You won’t have a tax problem for obvious reasons).
You don’t want to sell because of a gigantic capital gain tax. You don’t want to keep it because you’re wealthy enough to create estate tax problems for your kids. You’re in a bind.
So let’s manufacture a solution. You create the buyer—your own trust, for the benefit of your kids. You provide 100% financing with an interest-only, 30 year note. You sell at fair market value and get interest payments every year.
