And Asset Preservation
''All investors are looking for the same target when it comes to their investments.''
An Interview with Javier Vande Steeg
CEO - Asset Preservation, Inc
Our interview with JAVIER VANDE STEEG, CEO of Asset Preservation, Inc explores the inner workings of asset accumulation and wealth preservation strategies, with a focus on one of the premier IRC Section 1031 qualified intermediary firms in the United States. We catch up with this pioneering firm to discuss tax mitigation, asset and wealth preservation solutions for sophisticated and professional investors.
EG: How may the API Advantage be beneficial to sophisticated and professional investors?
Javier Vande Steeg: The API Advantage is based on experience and security. In API’s 30-year history we have facilitated a wide variety of complex transactions. API’s Commercial Division is a highly experienced and skilled group who work with high net worth investors, family offices and sophisticated corporate clients.
EG: Why might it be a better investment decision to exchange rather than sell an investment property?
JVS: The benefit of a successful exchange is that you keep pre-tax dollars working for you, allowing full equity to be reinvested and leveraged into profitable assets. Selling and paying taxes results in less capital to invest to that of exchanging and reinvesting tax free.
EG: When deployed correctly, how may the 1031 exchange actually guarantee wealth accumulation?
JVS: Investors who sell real estate can pay up to four different taxes: 1) depreciation recapture at 25%, 2) capital gains at 15-20% federal, 3) net investment income at 3.8%, and 4) when applicable, state taxes (which can be as high as 13%). While no one can say that a 1031 exchange “guarantees” wealth accumulation, I can say that properly executed exchanges defer, indefinitely, the aforementioned taxes on capital gain.
EG: How may trusts be utilised in the estate planning process to effectively implement a 1031 exchange transaction?
JVS: A trust, individual, or any entity can perform a 1031 exchange. The key issue is that the tax owner who sells the investment property must be the same tax owner who acquires replacement investment property.
EG: Where do you see the next big opportunities for wealth accumulation in the next 5-10 years and why?
JVS: The 1031 exchange is the best vehicle to preserve an investor’s equity and reinvest pre-tax dollars to grow their portfolio. While there are other ways to defer capital gains on the sale of investment property, none allow the continued control of assets like the 1031 exchange and the possibility of endless deferral.
EG: Are there any legislative or regulatory issues that may affect the strategy of investors that they should always remain aware of?
JVS: In the United States, government representatives look at tax code provisions like 1031 exchanges to assess how this affects overall tax revenue collected. In 2017, Section 1031 was changed to be limited to real estate where it had previously been available to defer taxes on a wide variety of other assets. With this recent change, we don’t expect any further changes in Section 1031 for a while. 1031 exchanges have been a part of the tax code since 1921 and the government realises this tax code provision helps encourage investment in real estate.
EG: How essential is the 1031 exchange as a core component of tax mitigation and wealth preservation strategy?
JVS: The 1031 exchange is an essential tax driven real estate transaction that is popular for obvious reasons. The majority of 1031 exchanges are the “delayed exchange” format, where the client has up to 180 days (beginning at the close of the relinquished property) to complete the exchange and acquire replacement property. There are two other exchange variations called “parking arrangements” that provide creativity and a “value add” when employed. Parking arrangements are used when the taxpayer needs to acquire the replacement property before selling their relinquished property, or when the desired replacement property needs substantial capital improvements.
EG: You have several fantastic testimonials from clients. What kind of service can high net worth investors expect when working with Asset Preservation, Inc?
JVS: API is extremely proud of its outstanding track record over the past 30 years. We are sensitive to the needs of each client and work diligently to make sure each exchange is well qualified, documented and perfectly executed. We have a very experienced and well-trained staff that understands all aspects of the 1031 exchange rules and strive to deliver outstanding performance that exceeds our clients’ expectations. EG