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J. Kevin Caple, CPCU, ARM
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P.O. Box 11145
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Charlotte, NC 28220
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(704) 544-1124
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kcaple@ringlerassociates.com
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Structure Strategies
Couple Uses Retail Property Sale to Fund Golden Years
Years ago, Dave and Maria made a smart decision. They purchased retail property in a prime location, and the property held its value for many years. Now the two baby boomers want to cash out and ensure a steady source of income as they enter retirement.
Their real estate broker saw a Ringler presentation on structured installment sales and thought it might be a good fit for the couple. Cash from the sale goes to a highly-rated life insurance company, creating an annuity to distribute guaranteed payments back to the couple. They never have to worry about the “what ifs” of a standard installment contract where they depend on the buyer to make payments for five, 10, 15 years or longer. And the money is there with interest no matter what happens in the market.
Plus – and this is a big plus – they defer capital gains tax because the IRS only taxes income the year it’s received. That means Dave and Maria have more money to earn interest over several years rather than paying it all to Uncle Sam up front. A Ringler consultant helped them map out several payment scenarios that fit their needs while working through all the details with their attorney, real estate broker and CPA.
Peace of mind is key to Dave and Maria as they enter their “golden years.” A structured sale does just that, providing secure payments for the long term.
(Note: While Structure Strategies is based on actual Ringler case histories, the names and images of the people involved have been changed to protect their privacy.)
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Minimize Taxes, Maximize Proceeds with a Structured Installment Sale
 Structured installment sales can fund long-term financial goals like retirement.
It’s important for business owners who are cashing out an appreciated asset* to evaluate the tax and financial considerations available for the proceeds from such transactions. By deferring capital gains taxes to a future date, the seller can put more money to work earning interest now rather than paying it all to Uncle Sam at closing. Factor in other potential tax advantages, a guaranteed payment stream (especially attractive during market volatility), and several other benefits, and a structured installment sale equals smart financial planning.
What is a Structured Installment Sale?
The Structured Installment Sale is an annuity that allows for the deferral of potentially large capital gains tax and the receipt of guaranteed installment payments over time. This installment sales approach allows the seller to choose what amount to receive now and how much to defer and receive later in the form of a periodic payment. The payment stream can be set to fit more immediate needs or help plan for longer-term goals, like retirement.
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Tax Advantages
Taxable gains in a structured sale are deferred to when payments are actually received, thus leaving more principal available to earn interest over several years. The difference to the seller’s bottom line could be significant.
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Guaranteed Income
Payments with interest are guaranteed by a top-rated insurance company through an annuity purchased with proceeds from the sale. No need to worry that the buyer will make future payments, which is often the case under a traditional installment sale.
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Payment Control
Prior to closing, the seller selects when the payments begin, how much is paid and when, and how long. That means maximum flexibility in planning for future financial needs.
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Inexpensive and Easy to Implement
Setup costs for a structured installment sale are low, and there are no ongoing management fees or expenses. Implementation is as easy as signing a few documents at closing (see below).
How They Work and Why You Need a
Ringler Certified Consultant:
A structured installment sale, and the annuity that powers the agreement, must be handled by a certified consultant. In these transactions, the seller and the buyer enter into a purchase and sales agreement. The seller then decides how much of the net settlement proceeds to defer. The Ringler consultant assists with incorporating the terms of the sale into the sales agreement and provides the relevant documentation needed to complete the transaction. At closing, all relevant documents are executed and the funds dispensed appropriately.
In addition to the right qualifications and experience, the Ringler consultant has the experience to help the seller and his/her advisors – sales agent, accountant, lawyer, etc. – understand all aspects of the transaction. During the consultation, the Ringler consultant will demonstrate various payment scenarios that fit the sellers planning goals, all while ensuring a smooth process to complete the transaction.
If you or a client are ready to take a closer look, contact your Ringler consultant today.
* Real estate, including personal property (i.e., a home) or commercial property (i.e., an office building). Businesses (i.e., a dental, veterinary or legal practice). Sellers should consult with their tax advisors to determine if a prospective sale qualifies for a structured settlement product.
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