Selling Your Home?

Increase your wealth, reduce your anxiety with an Installment Sale Trust

Selling your Home can be an exciting time to contemplate the freedom, new opportunities and adventures the sale will afford you. But it can also create anxiety and concern if you’re worried about the money you’ll have to pay to real estate agents and specially the roughly one-third of the gains after your exemption that will go to taxes. These all reduce the money you’d have to invest and the investment returns you’d be able to receive during retirement.


So, What Is an Installment Sale Trust And How Can It Help?

An Installment Sale Trust is a popular financial transaction with a long track record of success. It enables you to defer payment of state and federal taxes on the sale of your Home for a period of ten years or more. That means, for those ten years, you can invest the money you don’t pay in taxes to generate up to fifty percent higher returns than if you complete the sale without an Installment Sale Trust.

But Installment Sale Trusts aren’t for everyone. They are most popular with owners who expect to have significant gains to invest from the sale of their Home after their exemption and intend to invest at least $1,000,000 of those gains for at least ten years. Installment Sale Trusts are also for individuals willing to work with an Independent Trust Administrator, a key financial advisor who works on your behalf to increase your wealth.

If that’s you, read on to determine if an Installment Sale Trust might be right for you.

How Do Installment Sale Trusts Work?

An Installment Sale Trust involves the Homeowner, an Independent Trust Administrator, and a willing Buyer. When the Owner has place their Home on the market – but before any sale contracts are signed – the Owner contacts the Trust Administrator to request the establishment of an Installment Sale Trust.


The Trust then buys the Owner’s Home by issuing a 10-year Interest Bearing Note in the amount of the Agreed Sale Price net of selling expenses. The Note represent a loan from the Owner to the Trust that, using Internal Revenue Code 453, allows the deferral of taxes due on the gain on the sale until the principal is ultimately paid to the Owner in 10 years. The Trust is obligated to make regular interest payments on the Note and, at the end of the Note term, pay the Owner the principal plus an agreed portion of the Trust gains.

Once the sale to the Trust is complete, the Trust immediately sells the Home, for the Agreed Sales Price, to the Buyer who pays cash. The Trust realizes no profit from the sale and, therefore, owes no tax.

Since neither the Owner nor the Trust owe tax on either sale, the Trust has available one hundred percent of the gains from the sale and, in consultation with the Owner, is able to invest those gains in securities acceptable to the Owner as collateral for the Notes. The earnings from these investments are used to make the quarterly interest payments on the Notes; any excess earnings are reinvested to grow the value of the Trust portfolio.

A Simple Case Study

The net effect of deferring the tax payment on the sale of the Owner’s Home is to increase the investable proceeds and subsequent returns to the Owner. For example, say the sale of your Home generates a gain, after your exemption, of $1,000,000. Without an Investment Sale Trust, you would pay around $333,000 in taxes which would leave just $667,000 to invest. On the other hand, with an Investment Sale Trust, your Trust Administrator could invest the entire $1,000,000 on your behalf. Over a 10-year period, with an average rate of return of just 6%, your return on investment with the Investment Sale Trust would be $600,000, or fifty-percent higher than the return of $400,000 ($670,000 x 6% x 10 years) you would realize without the deferral. What could you do with an extra $200,000?


Your return on investment with the Investment Sale Trust would be $600,000


Property Owners and their advisors need to do their homework. Executing Installment Sale Trusts requires a team of experts in different fields. It is not just the legal and tax structure that is important but also the experience and collaboration of the team that is necessary to seamlessly complete a successful transaction.

And not all Investment Sale Trusts are created equal. In some cases, unscrupulous providers try to skirt the IRS’s arm’s length transaction rules to provide immediate cash to their clients through various schemes. Unfortunately, those schemes usually land them and their clients in financial and legal jeopardy. So, working with a knowledgeable and ethical Trustee is critical.

Installment Strategies, LLC, is a firm whose principals have deep knowledge of personal and corporate finance, significant experience with tax deferral structures, years of experience building their technical expertise and professional reputations, and a track record of ethical behavior.




W. Morris Chubb, Principal, Installment Strategies, LLC.

Mr. Chubb advises his esteemed clients on specific tax strategies to defer and mitigate Capital Gains Taxes, which significantly increases their investable retirement dollars. He started his career as a licensed CPA and has over thirty years of experience as a senior financial executive with pre-IPO and publicly traded companies.

Installment Sale Trusts aren’t for everyone. To find out if it could be right for you contact Installment Strategies, LLC to schedule a free 30-minute consultation.