Seward & Bellum, Attorneys at Law
Legal And Financial Guidance In Western Washington
360-602-1925

Protecting your assets in a Trump administration - Planning Tips Revisited

Now that Donald Trump has been in office for several weeks, the expected changes that we discussed in our last newsletter - repeal of the Obamacare surtax, lower corporate income tax rates, lower individual tax rates, taxes on imports, and child care credits - seem to be on track given the rhetoric from the White House and the majority in the house and senate.

With these changes comes uncertainty and in the words of an article [1] recently published in the Wall Street Journal: "risky times are ahead" citing the diplomatic tensions with Iran and neighboring Iraq and with American allies in the region. Based on this uncertainty, in our view, it is time to get your affairs in order. Families that have basic estate documents in place when needed save money in the long run. They can avoid costly court guardianship proceedings to handle their financial affairs if they become disabled and can avoid unnecessary family tension during their time of bereavement from the loss of a family member. 

Apartments, Apartments, Apartments

With the anticipated repeal of The Patient Protection and Affordable Health Care Act of 2010 and the repeal of the 3.8% surtax on investment income, and with the uncertainty of the stock market, we are seeing more investors taking advantage of the tax deferral benefits under Section 1031 of the IRS code with apartments as the "replacement property" investment of choice. At a 6% cap rate, [2] the surtax repeal on $1 million in investment income equates to an instant equity gain of over $600,000. [3] In addition, home ownership has been increasingly difficult for the millennials to afford and demand for apartment units should remain strong and keep occupancy rates high. Great financing is available at short-term rates below 4%. If you are interested in pursuing this type of investment strategy, please contact our office at (360) 876-6425.


1. Written by Gerald F. Seib and published by the Wall Street Journal on 2/6/17 at 12:56 pm EST.

2. The capitalization rate (or cap rate) is the rate of return investors are seeking and the purchase price is a function of the cap rate as follows: net income/cap rate = purchase price. This creates positive leverage when the cost of the financing in less than the cap rate. For example, $3 million in cash with 70% leverage can purchase a $10 million apartment complex. If the cost of the financing is less than the 6% return, positive leverage is created which enhances the return to more than 6%.

3. This assumes that the repeal has not already been anticipated by the market.

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