What Steps Can I Take To Avoid Probate?
Video Summary
What steps can I take to avoid probate? Well, the quick answers for a lot of lawyers to offer to this is to set up a trust. However, I have a little brochure that I pass out that’s called Simplified Estate Planning without the Necessity of a Trust in Order to Avoid Probate.
So you first have to look at the nature of your assets. For example, if you have a life insurance policy it needs a beneficiary so that doesn’t go through probate ‘cause it’s controlled by the terms of the life insurance policy.
That’s the same that’s true about individual Retirement Accounts or IRAs. You have a designated beneficiary so you don’t have a probate proceeding as far as IRAs, and that can also be said for annuities because the annuity contract will designate who’s to receive the death benefit or the benefits after the initial annuitant passes away.
When we turn to bank accounts, I suggest that you keep the bank accounts in your individual names and designate a payable on death for whomever you would like to receive it upon your death.
So the other designation is In Trust For or ITF account. If you put someone on account as a co-owner, so if you’re by yourself and you put your son or daughter on the account with you, they become a half owner of the account and it could be subject to the claims of their creditors if they get in financial problems or domestic problems, being considered an asset in a divorce proceeding. So I suggest that you simply designate a POD account or an ITF account for the benefit of that child or whoever you’d like to receive it and that will avoid probate.
One of the big sticking points is what do I do about real estate, particularly your home. Well, what I have been doing is to prepare what they call a Life Estate Deed, whereby you convey your property to your child or children or whomever you would like to have it upon your death. However you reserve all rights on the property during your lifetime. You’ve reserved the right to sell the property and retain the assets. Sometimes this is called a Ladybird Deed, and this again avoids probate.
And if you want your assets to be spread out over a period of time, let’s say you need a Special Needs Trust or a Spendthrift Trust for a child or a loved one that you want to care for, then certainly a trust is another way of doing it, although there may be a trust administration involved.
So those are some of the examples of how to avoid probate, is how you title your assets. So if you’re interested in doing that give me a call at 727-847-2288. Thank you.
What Is A Balloon Mortgage?
Video Summary
What is a balloon mortgage? That certainly is a strange word to use, but it is a legally-defined term, and it means a mortgage brand or is a payment that is twice the amount of the regular payments that are paid.
Best way to illustrate this is let’s say that you have a $100,000.00 mortgage, and you set the payments out so that it would be paid out over a period of 30 years. So let’s say the payments are $500.00 a month, and we won’t go into the interest rate, but you pay $500.00 a month for five years, and then the note says it becomes due and payable in five years.
Well, you haven’t paid off the $100,000.00 in the five-year period so after five years you’ll still be owed probably $60 or $70 or $80,000.00 on the $100,000.00, and that’s called the balloon payment.
So that’s the illustration or an example of a balloon payment, which is whenever you have regular periodic payments, and then you have a very large payment that becomes due and payable. Most of your commercial mortgages these days also set up a balloon payment. They spread your mortgage payments out over a 15- or 20-year period, but they say the loan becomes due and payable after three or five years, and certainly if you have investors involved, that can be the case with residential property whenever you have owner financing.
If you use a balloon mortgage on a residential property, and it’s a second mortgage, then the statutes provide that you must have certain bold-faced language at the top of the mortgage and also above the signature page indicating this is a balloon mortgage and setting forth the amount of the balloon payment, and that’s so it’s basic consumer protection type situation so someone can’t say, “Well, oh, I thought I’d have this thing paid off in five years.” Well, if there’s a principal balance above where you sign it, well, you’ve got to sort of be blind in one eye and can’t see out of the other if you can see that the principal balance is not going to be paid off when the loan becomes due and payable since they set forth a balloon payment. There are some penalties if this language is not on the second mortgage on a residential transaction.
So that’s a balloon mortgage. If you have any questions about it, well, give me a call at 727-847-2288. Thank you.
- Published in Real Estate, Videos
Do You Understand Your Trust?
Video Summary
Do you understand your trust? I would suggest that probably you understood your trust whenever you signed it, but if you’re quizzed about your trust three or four weeks or certainly a year later, you probably don’t understand it because it’s about 16 pages or longer, and that’s a lot of stuff in it that the lawyer knows about, but you don’t necessarily understand, other than what you remember about the trust, and so I would suggest that you probably don’t understand your trust, but I do suggest that you maybe read it, review it and maybe contact a lawyer to have him review it with you to make sure that it accomplishes everything you would like to have done, particularly as far as whenever you pass away that it goes to who you want it to go to in the manner you want it to go to, and if you have a spouse involved, that the spouse either has flexibility as far as changing the trust after your death or, if you don’t want them to have any flexibility, many times trusts, as well as wills, but particularly with trusts, if they’ve been drafted for eight or ten years and they haven’t been revised, there’s provisions on how they set up an irrevocable trust at your death for tax purposes, and that has some real problems whenever you have an irrevocable trust, particularly for a spouse, which was not giving the spouse any flexibility.
Also, there’s a lot of confusion as to the ability to amend trusts, change joint trusts after one of the joint settlers or grantors of a joint trust passes away. So I urge you to dust off your trust document, look it over, and if you’d like, give me a call and we can sit down and go through your trust. And first I’ll ask you what you’re trying to accomplish; and, two, then we’ll review it to see if it does what you want it to do, and we’ll point out any irregularities or problems with it as far as what it accomplishes.
So if you’d like for me to review your trust, give me a call at 727-847-2288. Thank you.
If I Have a Homestead Exemption in Florida, Can My Spouse Hold a Homestead Exemption in Another State?
Video Summary
If I have a homestead exemption in Florida, can my spouse hold a homestead exception in another state? The answer is, “No,” because if you’re husband and wife, the property appraiser determines that it is a family and therefore you’re saying that the family has their homestead or permanent residence in Florida if you have a homestead exemption. Whenever you sign the application for homestead, you say that you don’t have an exemption in another state and that goes for your spouse.
It’s even more difficult whenever people are going through a divorce proceeding and they’re not divorced and they’re separated for some time and they’re not going through a divorce proceeding, whether or not both spouses can obtain a homestead exemption. I know that our local property appraiser, Mike Wells in Pasco County, is really tough on this and in fact investigates any number of people who apply for a homestead exemption to determine whether or not they have homestead in another state. If they do, then he slaps a homestead lien against their property for all the exemptions they received.
I don’t know how other property appraisers are as far as investigating this, but if your spouse is getting homestead in another state, then I don’t suggest you try and get homestead in Florida because if you get caught, the homestead exemption penalties are quite severe. He puts a lien against your property for all these back-due taxes. So I would talk to the property appraiser of you do want to try and do that and ask them before you apply for a homestead exemption here in Florida in your name. If you have any other questions, give me a call at 847-2288. Thank you.
- Published in Real Estate, Videos
Do I Have To Pay Taxes On My Short Term Capital Gains?
Video Summary
Do I have to pay taxes on short-term capital gains? The answer is, “Yes, you do.” The question should probably be rephrased as, “At what tax rate?” Well, it’s my understanding that if you have short-term capital gains, you have to pay at your ordinary tax rate. Also, what do you mean by “capital gains”? That usually has to do with whenever you sell property under the Code Section 1031 property, which is property that’s held for business or investment purposes.
If you only hold it for a short period of time, then it’s considered a short-term capital gain and you can offset your short-term capital gain against your short-term capital losses (hopefully you don’t have any of those.) But you can see how that could work because if you were buying and selling houses, you buy a house, you fix it up, you turn around and sell it in a matter of three or four months and you make money on it. That would be considered a short-term capital gain and taxable at your ordinary rate.
Now, short-term capital gain versus a long-term capital gain: I believe the holding period is for one year. So if you hold your property for long enough to qualify for long-term capital gains, long-term capital gains are taxed at a rate of 15 percent. Now, that Internal Revenue Code provision may be being phased out this year. I think that was under the Bush tax cuts, but I could stand to be corrected. These are more something that you could talk to your accountant about. But if you hold investment property for more than a year, then when you sell it you can take advantage of the long-term capital gains.
Now, whenever you sell your home, however, if you lose money on it no matter how long you’ve had it, you don’t get to take any loss on the sale of your house since you don’t hold that for the sale of business or it’s not an investment; whereas if you sell your home and you make a gain on it, you can exempt gains up to $250,000.00 if you lived in the house two out of the past five years. Let’s say that you didn’t live there for that period of time and you had a gain. Well, then you didn’t hold it for more than a year and sold it and had a gain. Then it would be a short-term capital gain, which you’d have to pay ordinary income for.
So if you have any questions about buying and selling your property and short-term capital gains, give me a call at (727) 847-2288. Thank you.