If you are not a resident of California and want to purchase property here, figure out the basics of property ownership before you put down your hard-earned cash. The laws differ for non-resident United States citizens and non-resident non-citizens.
Can You Purchase Real Estate in California?
You do not have to be a resident of California to purchase property here. Nor do you have to be a citizen of the United States. While being a citizen and a resident can make financing easier, people from other places can hold property in their name as long as they can pay for it.
Will Buying Real Estate in California Create Tax Problems?
If you plan to live in your California real estate, you could end up paying California’s high income tax rates for all of your income. If you purchase the property as an investment, for a child to use, or for rental income, you will pay California taxes on rental income in many situations. Since the tax situation can vary depending on how much time you spend in California and what you use the property for, consult legal and tax professionals to make sure you report everything correctly.
Will Buying Real Estate in California Impact Estate Planning?
Yes, in many cases California property purchases could affect your estate plan. For example, a non-resident, non-citizen who does not have a green card could purchase a $1.5 million house in California. The purchaser may intend to leave the house to his U.S. citizen child but pass away unexpectedly first. His estate could end up paying $495,000 in estate taxes in the United States due to that house purchase. In addition, his estate will have to pay thousands of dollars in probate costs. Working with an estate planning attorney before making the purchase could have saved his family hundreds of thousands of dollars.
How Can You Reduce or Eliminate Tax Liability?
You may need to place the property in an ownership structure or purchase the property through the ownership structure. Ownership structures refer to business entities like partnerships, limited liability companies, U.S. corporations, foreign corporations, foreign trusts, or real estate holding companies. Depending on the structure you choose and your circumstances (such as your green card status), your tax savings will vary. You need to seek competent legal advice about using these ownership structures before you buy the real estate, or if not, then as soon as possible after you make the purchase.
Planning to purchase property in California as a non-resident? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience and her certification as a California estate planning and probate specialist by the California State Bar Board of Legal Specialization will give you confidence and peace of mind.
To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.