Solutions
Structured installment sales
When you sell real estate or a business, a large tax bill can take a big bite out of the proceeds. A structured installment sale spreads your payments, and your tax, over time, so you're likely to keep more of what you worked for.
The basics
What is a structured installment sale?
It is an annuity bought with some or all of the proceeds from selling real estate or a business. Instead of the full price in one lump sum, the seller receives payments monthly, quarterly or annually, for up to 40 years.
Because each payment is only part of the sale price, gains are taxed only as they are received. That can lower the effective capital gains rate, and may keep you below the threshold for the 3.8% Net Investment Income Tax (NIIT).
Qualifying assets include:
- Residential real estate
- Commercial real estate
- Business sales
Versus a standard installment sale
No dependence on the buyer
Standard installment sales have existed for over 100 years, but they share one weakness: you rely on the buyer to make every payment. If the buyer goes bankrupt, defaults or disappears, collecting becomes your problem.
A structured installment sale removes that risk. The payment obligation is assigned to a financially secure life insurance company, so your payments are guaranteed whatever happens to the buyer or the asset.
Tax advantages
Four ways it can reduce your tax
Capital gains deferral
Tax is spread across the years you receive payments, not all due in the year of sale.
A lower bracket
Smaller annual payments may keep you in a lower capital gains bracket.
Avoiding the NIIT
Payments may keep income below the $200,000 / $250,000 threshold for the 3.8% Net Investment Income Tax.
Continued earnings
The unpaid balance keeps earning interest while your tax is deferred.
Benefits
Guaranteed, flexible and protected
Guaranteed payments
Fixed and guaranteed by a life insurer rated A or better by A.M. Best.
Flexible scheduling
Level or increasing; monthly, quarterly or annual. Payments start within a year of the sale and can run up to 40 years.
Protection from default
Your income is backed by a third-party institution, not the buyer.
Built around your plans
Retirement income, a future large expense or ongoing cash flow, tailored to your timeline.
Getting started
Timing is critical
The structured installment sale must be set up before the sale closes. Once you receive the proceeds, the chance to defer and reduce the tax has passed.
Contact us as early as you can. We'll model your payment options, coordinate with your CPA and attorney, and finalize the structure before closing.
Talk with our brokers about your case
No pressure and no jargon. A short conversation is often the clearest way to see your options.