The 4% rule;which is it?

[OldShooter]

They would have the option of having either property re-assessed if they wanted to do so.

We recently went through an inheritance, where my wife was the executor and the sole heir. The probate court contested the will, and it dragged out for 18 months. Nobody else, ever stepped up to say that they were heirs. It still all went to my wife. But we had to pay for the lawyer fees. We wanted to make our estate to go smoother.

@Offgrid Organic Farmer, with all due respect you are not understanding the concept here. The basis step up has nothing to do with getting the properties re-assessed and your experience with your wife's inheritance also has nothing to do with this. If your LLC approach loses the basis step-up it could easily cost your sons many tens of thousands of dollars in taxes. That is not an exaggeration. Loss of the basis step-up is one of the most common and most expensive mistakes made by people who try to do estate planning on their own. I strongly suggest that you run your plan by a trusts and estates attorney or an elder-oriented CPA.

OP, sorry to contribute to this off-topic discussion but IMO this is important. I will stop now.

 

[NW-Bound]

... I have a very, very low SWR as I have a great pension, but I don't want to leave a small fortune on the table when I die at exactly 92.5 years old either. Just trying to figure it out. What say you?

We have some former posters who died only a few years after retirement.

Did they wish they had done a higher WR, like 15%/yr? I think they just wished to live longer.

 

[Offgrid Organic Farmer]

@Offgrid Organic Farmer, with all due respect you are not understanding the concept here. The basis step up has nothing to do with getting the properties re-assessed and your experience with your wife's inheritance also has nothing to do with this.

When I depreciate the basis goes down, and as I re-invest int the property I drive the basis back up again. When someone inherits, they DO NOT use the former cost-basis. They have it re-assessed and start with that number.

... If your LLC approach loses the basis step-up it could easily cost your sons many tens of thousands of dollars in taxes. That is not an exaggeration. Loss of the basis step-up is one of the most common and most expensive mistakes made by people who try to do estate planning on their own. I strongly suggest that you run your plan by a trusts and estates attorney or an elder-oriented CPA.

OP, sorry to contribute to this off-topic discussion but IMO this is important. I will stop now.

We did when we formed these LLCs

 

[FREE866]

"Unless we see the return of a Great Depression era, followers of the 4% rule “will most commonly just leave a huge amount of money left over,” says Michael Kitces

 

[brainsagolfer]

I think trying to pin down a SWR as a CONSTANT is not realistic enough for the inevitable changes as you grow older. In my case FIRE-ing at 56.5 YO i will need to spend about 5.3% until i am 59.5 Then i can pay off the house when i can access my IRA $. At that point my withdrawal ratio is 3.3% of the original total retirement savings. Then at 62 when SS kicks in, i can lower my WR to 2%- and still spend the same amount as when i was at 5.3% WR.
I firecalced this info- with "constant spending power" selected, so even though i will actually spen more it should be inflation adjusted. i know the percentages are of the ORIGINAL amount and since i WD at 5.3% for 3 years it will make the effective % that folows a little higher- should be pretty close though.
So... 5.3% for 3yrs, 3.3% for 3 years, then 2% for the remainder- that is way less than an averaGE OF 4%

 

[exnavynuke]

[/B]

exnavynuke
On point #3, are you familiar with Clyatt's 4/95 WR strategy?
If so, would you consider using it in down years?
I am strongly considering for next year and always open to ideas on the concept.

Wasn't familiar with it, but I just looked it up. It's similar to what I plan but a little more rigid, and doesn't really seem to address other possibilities (like getting some extra income instead). My view is that all the "rules" for SWRs are really guides, and thus most people would likely change their plans if things were going very well or very badly, so they're really more of a "starting point" or "planning tool" overall.

 

[Dtail]

Wasn't familiar with it, but I just looked it up. It's similar to what I plan but a little more rigid, and doesn't really seem to address other possibilities (like getting some extra income instead). My view is that all the "rules" for SWRs are really guides, and thus most people would likely change their plans if things were going very well or very badly, so they're really more of a "starting point" or "planning tool" overall.

Appreciate the response. Extra income such as consulting would not be open for me, as my "expertise" was in a field that in general is not open to people my age once out of the workforce and I will not do minimum wage type jobs.
Thus the expense/investment aspect is my concentration.

I hear ya on the guide vs. rule though....

 

[Conundrum]

Yes, I think I understand the idea. Let me try to explain my question:

When one inherits property from an estate, the inheritor's tax basis on the property is its value on the date of death. For example if you held your farm personally and bequeathed it to your sons, there would never be any tax paid on the gain between your basis and the farm's value on your date of death. If you have held the farm for a long time, this could be a huge benefit. Did your tax advisor tell you that this basis step-up still applies if the farm is held in an LLC and the LLC is transferred as you expect?

The same question applies on the other LLC. Will your sons get the basis step-up on the commercial and residential property?

My Real Estate attorney and CPA told me I would gain a measure of protection but I would lose the step up in basis if I placed a property in a LLC. They also said each property should be in its own LLC.

 

[pb4uski]

Give it up guys... you can't help those who know it all.

 

[MoneyIsMyHobby]

Basis step up

I investigated this as well at one point. To the best of my recollection, the 'inheritor' gets the step up in basis on the inherited portion. Therefore, if the heirs own 1%, they would still get the basis step up on the other 99% they inherited. I believe this information came from my accountant.

This also applies to spouses who are both members of an LLC... which was our situation for rental properties and why we looked into it. At this point, our heirs are not members of the LLC.

MIMH