New legislation, called the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, was passed by the United States Congress on December 16, 2010 and signed into law by President Barack Obama on December 17, 2010, which affects federal estate taxes.

A summary of the new law is as follows:

• As a temporary measure, for calendar years 2011 and 2012 the Federal Estate Tax Exemption amount is 5 million dollars for persons dying during those years.

• The highest estate tax bracket will be 35%.

• Estate taxes remain a lien on real property for 10 years from the date of death.

• A surviving spouse can continue to convey free of the lien of estate taxes to a purchaser for value.

• As a temporary measure, the step-up in income tax basis has been continued for persons dying in 2011 and 2012 will go to the heirs, and give them a cost basis that is equal to the fair market value at the time of death.

• Raises the lifetime gift tax exemption to 5 million dollars for gifts made after January 1, 2011.

• As a temporary measure, the minimum gift tax rate during 2011 and 2012 is 35%.

If you have any questions about how the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 impacts your finances, you should speak with your financial planner or tax advisor.

Deciding what legal entity in which you buy and hold your real estate is important.  You should to consult with your financial and tax advisors along with your New York real estate attorney to figure out the right legal entity.  You should consider, among other things, the type investment property, the amount of equity and debt at stake, revenue projections and other matters like management of the property itself.

Generally, a Limited Liability company (an LLC), is the proper entity to hold investment real estate.

• Like a corporation, the members’ liability is limited to their capital investment (absent any contractual personal guaranties).  Structured properly, liability incurred on one property will not impact other real estate that is owned.

• An LLC can elect to be taxed as a partnership – with the profit and loss of the investment passed through to the members’ individual tax returns.

• An LLC has less legal formalities than other corporate structures. See my article, “Why Choose a Limited Liability Company (LLC) over a Corporation For Your Small Business?“

• There are numerous advantages in using an LLC for Section 1031 tax deferred exchanges and for estate planning.  For instance, if properly structured, the value of a gifted LLC membership interest could be done at discount (e.g., a controlling interest has greater intrinsic value over a minority interest).

You should consider hiring a New York real estate lawyer early in the process.  He or she will work closely with your tax and financial advisors to help structure your investment real estate holdings in the best way possible and can guide you through the real estate buying process by preparing and negotiating the real estate broker agreement, drafting the contract of sale, negotiating lender agreements (notes and mortgages), IRS Section 1031 exchange planning, among other things.

**This post is for informational purposes only, For legal advice contact a business and commercial real estate lawyer**

Cooperative apartments (“coops”) differ from condominiums (“condos”) in several ways.  When you buy a coop, you buy stock in the corporation that owns the apartment building.  The building then “leases” the coop to the buyer under a long-term proprietary lease.  Coop owners pay monthly maintenance to the building corporation for items such as the expenses of maintaining and operating the building property, property taxes and the underlying mortgage on the building (if any).

When you buy a condo, you buy an individual parcel of real property, like a house or townhouse.  The condo building is divided into individual condos and a common area.  A condo owner owns its apartment and an undivided interest in the common area and is responsible to pay its own real estate taxes and its share of the common charges for the expenses to maintain and operate the common areas.  Unlike a coop building, there is no underlying mortgage on a condo building.

Generally, a condo has a higher value than a comparably sized coop; however, a condo buyer has additional closing costs for title insurance and mortgage recording taxes.  Depending on the coop building, the tax deductibility percentage of the monthly maintenance charges may differ.

You should consider consulting with a New York condo attorney or coop lawyer once you find an apartment you want to buy.  He or she will guide you through the home buying process by preparing or reviewing the contract of sale, advising you about financing and title insurance, answering your legal and tax questions, and arranging for the documents necessary to complete the purchase.

Manhattan home ownership—whether a condo, coop, or townhouse—can provide you with many benefits, including, a long-term investment and tax advantages. Of course, a home is also a major financial commitment.  There are ways to avoid costly pitfalls that can strain your budget and your patience.

At the time of the closing, you will have to pay the price for the home and closing costs. Thereafter, you will need to budget for insurance premiums, maintenance, monthly loan payments, property taxes, utility bills, and repairs. Prior to entering into a contract of sale, it is recommended in some cases that a buyer conducts an inspection of the home, which includes, checking the age and condition of appliances, plumbing, roof, structures and wiring, and other physical elements of the home.

A New York real estate lawyer guides you through the home buying process by preparing or reviewing the contract of sale, advising you about financing and title insurance, answering your legal and tax questions, and arranging for the documents necessary to complete the purchase.

You should not sign a contract of sale unless it protects your rights.  Your New York condo lawyer reviews and amends the contract of sale accordingly. Any conditions that must be met before you complete a home purchase should be stated in your contract of sale.  For example, many buyers make their home purchase contingent upon obtaining financing.

The “closing” of a contract of sale completes the purchase and takes place at a meeting in the offices of the New York coop attorney representing the seller or lender, if any, or at a location designated by the coop corporation. At the closing, the buyer, seller, and lender sign a deed and mortgage (for a condo or townhouse) or the stock and proprietary lease documents and the security agreement (for a coop), pay the purchase price and exchange documents. At the closing, the buyer may receive a title insurance policy, along with a statement of closing charges and the keys to the home. Your NY real estate lawyer attends the closing to assure that the documents and computation of closing costs are accurate.