When selling your business, real estate property and similar appreciated assets, you may look for the best way to secure a guaranteed stream of income and also like to defer all or a portion of the capital gains tax realized from the transaction. There are many more things attached to this aspects. One of these is the concept of a structured sale annuity, a secured method of selling your real estate, business or other property and also one of the least understood financial tools in the tax and investment community. CATD in an effort to educate you and provide a greater understanding of Structured Installment sale, it’s process and benefits in the selling of real estate properties with maximum capital gains but minimal capital gains tax for the seller, business or personal planning situation.
What is Structured Sale Annuity?
Structured sale annuity is the method of selling real property or business with the aim of securing a guaranteed income stream and deferring gains on the proceeds. Conversely, structured sale annuity is an ensured installment sale or structured sale process that offers a regular stream of income based on the agreed structured sale annuity rates and tax rules governing installment.
The annuity used in the structured sale process is specially designed by the life insurance companies providing the vehicle to defer capital gain taxes. The annuity is fixed premium annuity that can be tailor-made to meet the seller’s income stream needs. Structured Sale Annuity is perfect for sellers who aim to defer the payment of capital gains tax and secure a guaranteed stream of income for a certain number of years.
How Does a Structured Sale Work? – A Structured Sales Process
Structured sales annuity is a twist to the traditional installment sales which makes the seller disadvantaged in case the buyer defaults in installment payment arrangement. This option is an ensured installment sale, in that, the buyer does not pay directly to the seller but to a third-party assignment company that goes ahead to secure an annuity from an insurance company and the seller is the sole beneficiary of the annuity purchased. This arrangement guarantees regular payments to the seller irrespective of what the buyer does and this giving the seller the confidence and assurance of receiving full sales proceeds from the sale.
Why Use Structured Sale, a Tax Deferred Annuity?
Structured sales are funded by annuities, and this method of installment sales has proven safe, efficient, and helpful to meet upcoming financial obligations. There are other investments along with tax-deferred annuity known to provide periodic payments.
Annuities based on structured sale annuity rates will increase the deferred funds with the fixed interest – meaning that your payments continue to receive interest until you withdraw in the future while you successfully defer the recognition of taxable till the future.
Structured sale annuity is more preferred than the traditional installment sales model based on an added layer of protection on the sellers deferred income. The insurance companies offering ensured installment sale are subject to regulations and monitoring to ensure that they operate within the framework of the provided service. In addition, the insurance companies have sound reserve requirements that aim to prevent defaults or insolvency.
Sellers find structured sales process assuring due to the safety of their income that is backed by an insurance company. They are assured of payments with a good rate of return. The structured sales annuity offers the chance of creating an income base they can count on. Besides, the cost of implementation is low.
Structured sales annuity offers a great deal of convenience to sellers and gives them the peace of mind, assured of some of the income to meet future financial commitments without taking any risks.
Tax Advantages and Other Benefits of A Structured Sale Annuity
- First of all, You can postpone the recognition of tax liability on gains for many years as long as the installment arrangement is expected to last. The capital gains tax on the ensured installment sales returns can be owed or deferred to a later date or year.
- The structured sale allows the pre-taxed principal to grow in relation to the structured sale annuity rates.
- An ensured installment sale is a guaranteed product that offers security, safety, and assurance with your sale having each structured portion delivered to you as at when due without any hassles or default.
- The structured sale offers a consistent flow of income that allows the taxable gains to earn you interest until finally paid.
- Structured sale has a return of 8% to 10%, better than what any investment tool can offer with its attendant benefits.
- It is useful for creating a guaranteed income base for retirement. Thus, it provides assurance or a guarantee that income is available.
- The structured sale is a set-and-forget strategy that guarantees consistent income without monitoring, ongoing fees, vulnerability to the market changes, etc.
- So far, structured sale annuity has been the best financial tool that is easy to set up, with low cost, requiring no monitoring with guaranteed regular income without chances of insolvency or default.
Defer Your Taxable Gain and Reduce Your Investment Losses with Ensured Installment Sale
Installment sales, from which you receive payments for more than one tax year, allow you to defer your sales tax or capital gains tax until you receive the full amount of the sales.
Adopting the ensured installment sale option, you secure your investment by removing the potentials of losing your investment. By using structured sale annuity, you have nothing more to fear about the ability of the buyer to make future payment after the buyer has assigned the agreed purchase price to the assignment company.
There is no risk of losing your investment because your investment has been backed by an insurance company immediately the ensured installment sale in signed.
Structured Sale a tool of Interest for Buyer and Sellers of Real Estate or Businesses
Buyers and sellers of real estate can consider structured sale real estate as a vehicle for completing their contract. Ensured installment sale offers a secure way to sell and buy real estate. As a real estate seller, you can rest assured of regular payments without risks of fluctuations in the market prices of real estate, the uncertainty of the ability of the buyer to redeem future financial obligations and the possibility of deferring the payment of capital gains tax.
In addition to receiving the sales amount in installments, sellers of real estate can earn from 8% or 10% interest on their payments with the assignment company. It is, therefore, an exciting tool to try.
How to Qualify for Structured Sale Annuity if you are Setting up a Real Estate Property or Business?
Only properties that meet up with the requirements of structured sale annuity can be sold using the tool. To qualify, the property must be one that generates at least one payment for the owner after tax year it is sold.
Each installment payment must complete taxable gain, non-taxable recovery of investment, and interest income in the fund held by the assignment company.
What Does Not Qualify for Structured Installment Sale?
Items that do not qualify for structured installment sale include inventory, stock and securities traded on a recognized market and personal and real property having certain exceptions.
Also, a property will not qualify if a portion of its gain is subject to depreciation. Finally, the sale of depreciable property between related persons cannot use structured installment sale.
We Are California’s Structured Sale Annuity Company
CATD(California Trust Deed Investments) is the reliable and trustworthy structured sale annuity company in California. With our services, you have nothing to worry about. You can get a structured sale for your property in the easiest way possible. Contact us or call us today at 818.865.1570 to know the eligibility of your property for your structured sale annuity. We are the affiliated experts in California, to help you determine if this planning tool is right for you. We look forward to working with you.