5 Common Mistakes People Make When Selling Their Highly Appreciated Assets And How to Avoid Them

You may have spent many years of your life waiting for your real estate, business, practice, stock portfolio or collection to grow in value. Then, the time comes when you are ready to sell. You find a buyer, negotiate a fair price, and then lose 15-45% of your gains to Uncle Sam, the average being about 25%.

The good news is that you have choices to avoid a good portion of this loss. You can also avoid the following mistakes I find most common amongst less savvy sellers. Below are just a few.

Mistake number 1: Not having a plan in place prior to sale. Worse yet, not even knowing you have multiple options available to you.

Mistake number 2: Getting your financial and tax planning advice from someone not qualified to provide it. Chances are, your hairdresser or golf buddy don't keep up to date on this type of specialized subject. Yet, I see time and time again, people relying more on the opinion of a relative or acquaintance than on the experience of a specialist. If Uncle Joe is the one making the choice for you at least bring him into the loop at the beginning so he hears the same information you do and can have his concerns addressed.

Mistake number 3: The misconception that you must have "total control" of your asset of all times. The IRS has specific rules that in order to defer or spread out repayment of capital gains, most strategies require that you are not able to be in full control of your asset and still enjoy tax benefits. Your control is in setting up a plan that will meet your needs over the period of time you choose. Social Security or a Pension plan pays you over time and with a payment you can rely on receiving. The same concept applies here.

Mistake number 4: Forsaking safety for the unrealistic "big score". Unless you are at a point in life where you can gamble your principle, this is not the time to think you will get double digit returns each and every year without the very real risk of major loss. If you don't have a time horizon of at least 10 years before you need to access any of the funds to live on, this is the time to protect yourself and insure against loss.  Keep a portion aside if you still want to play the odds.

Mistake number 5: Doing nothing for fear of making some sort of mistake. This is not to say jump into something you don't understand.   Instead, take the time to understand the pros and cons. Ask the questions you are most concerned about and be sure you have received answers that make sense and make you feel comfortable before proceeding ahead. Get a second opinion from another qualified source, but make sure everyone talks to each other instead of one "professional" bad mouthing the other with misleading facts. Be suspicious of anyone not willing to joint conference to present their view and address their concerns. Your advisor should always put your interest first.

Do be proactive. Do consult with someone who specializes in this area. Be honest about your major concerns and don't be afraid to ask questions until you are satisfied with the answers. A good plan will save you a lot of money, protect you through your retirement years, and provide the security your asset sale was meant for.

Paula Straub

www.SaveGainsTax.com

760-917-0858

savegainstax@gmail.com