There are people with better tax knowledge than me on here but here is what I think/know.

1. Each of us has particular needs and other stuff that affects the tax that will be due.

2. You should consult a tax expert that can assess your particular situation.

3. In general, with current tax rules, which may likely change, once you are both gone, your son inherits the properties at a stepped up basis at that time. This may change - hey, it's the government.

4. There's one strategy that says keep the places, borrow against them and let the children inherit.

5. There's also the idea of using 1031 exchanges to swap existing places for others.

6. Also, depending on what happens in this country, some people consider investing in other countries and real estate there. But then you have to deal with the rules and taxes there.

My first rental I purchased at 18 years old, some 46 years ago. Too many of my fellow investor/landlords will over to their kids in the form of a LIVING FAMILY TRUST. But kids are dumb and parents were too lazy to teach their kids on what to do and how to handle things.

For example, when I die, My Living Family Trust gets divided into two trusts. I decedents Trust and the Survivors Trust. So if my wife re marries my trust's income goes to my wife but when she passes on, my trust goes to our kids. Her trust, 1/2 of our trust, can go wherever she wants.

Most kids take assets out of their parents trust and then when they divorce, all of the parents assets goes to the X, not the grand kids.

I would put it into a land trust instead of living trust.

If you don't have mortgages on the properties (and your son actually wants to own and operate rental properties now and not just in the future when he inherits them), you could consider selling the properties to your son now using seller financing. Like Ray said, the income from the gain would be spread out, so it would not impact your Medicare as much.

In this scenario, you enjoy the monthly mortgage payments (like you enjoy the rent now), and the management shifts to your son, although you could help him out as much as you all agree is practical.

Having your son inherit the properties implies that you actually owned and operated them until death, which may not be that much fun.

Richard's answer is likely best: seek professional help from people who do this day-in and day-out. I would agree, based on what my CPA has told me, that the best case scenario is to bequeath the property to him in your estate, assuming current law doesn't change.

The stepped up basis requires that at the time your son inherits, the property must be appraised. That will become his new basis in the property. If/when he sells someday, he will only owe taxes on the different between his net profits and the new basis (less any depreciation). A considerable savings indeed, especially if you owned the property for a lengthy period and it was fully depreciated. The stepped up basis eliminates all taxes owed from appreciation of the asset as well as the deprecation recapture.

I am not a tax expert. Consult a CPA in case I'm mistaken on any of the above.

Thank you for being thoughtful about this aspect of your life. I've met too many people who don't want to talk about death or their estate, and once it's too late it becomes a mess for those left behind. It is a gift of love to your family to set your wishes out clearly and legally and make sure everyone knows about them.

Joel Miller, your understanding is incorrect based on my experience. You can not sell a property to a family member under an installment sale and spread out the taxes based on when the payments are received. It is treated/taxed as if the funds were paid in full the year of the sale- even though they are not.

I wanted to do the same thing and it’s just not doable when selling to a family member even if they pay market price.

I made no implication in my prior post that the intent of selling the property to their son using seller financing would be for the avoidance of taxes; only for the avoidance of having to own and operate the property until death...which doesn't seem like a great idea to me. My assumption was that the property would be sold at market value to the son with a typical interest rate via a routine closing with normal documentation.