How Can I Set Up a Trust for my Grandchildren?
Video Summary
You can set this trust up in your will and that’s called a testamentary trust for your grandchildren. Another way to do it is just set up a living trust, also called a revocable trust, and provide for your grandchildren in a revocable trust or your living trust. However, if it is for a very small amount you may want to consider setting up something on the Florida College Prepaid College Program and there is another way to set this up so the grandchildren receive the account when they are age 21 by setting up an account in your name as custodian under the uniform transfers to the minors act and the account is held until such time as the minor reaches the age of 21. And if you pass away they can petition to have another custodian appointed such as your child or you can put it in their parents name to hold for them until they are 21 years of age. If you would like to do a trust or some estate planning for your grandchildren give me a call at (727) 847-2288.
What is Involved in a Tax Deed Sale?
Video Summary
I’ve received a question about what is involved in a tax deed sale from a recipient of our newsletter. The tax deed sale starts back whenever they issue tax certificates and you purchase a tax certificate. That is done on an auction type basis and it’s a reverse auction. So if you bid on a tax certificate for whatever the taxes are on a particular piece of property and no one bids against you, you get it at an interest rate of 18 percent. If someone is bidding against you, well, they bid 17 percent and then you can bid 16 percent, all the way down to I guess 0 percent as far as bidding for the tax certificate.
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ce you acquire the tax certificate, you hold it until such time as the owner pays you in full for that, or after there have been two tax certificates or two years when the taxes have not been paid, then either one of the tax certificate holders can apply for a tax deed. And when you make application for the tax deed, all back due taxes have to be paid. Now sometimes you see a situation where no one really wants to step up and pay these back due taxes so you may have three or four years’ worth of back taxes before someone applies for a tax deed. Once you apply for a tax deed and you pay the back due taxes, the clerk then does a title search to determine who the owners of the property are and who the mortgage holders are, and then they give notice to the owner and anyone who has an interest in the property and tell them that the property is going to be auctioned off for the back due taxes.
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he taxes, once the auction takes place, are bid on a dollar amount and the bidding starts at the total amount of the back due taxes. So if no one bids at the auction, then whoever has paid all these back due taxes on the tax certificate receives the property or certificate of title, whereas if there’s a third party bidder or someone else bidding, then the amount continues to go up and any amounts above what was owed on the back due taxes is paid out to the owner of the property as their interest.
The only time that the value comes into play as to the value of the property and how it might affect your bid is in the event it’s someone’s homestead property. In that event, the statute provides that you have to bid a certain amount, a certain percentage, which I don’t have right off the top of my head to tell you what percentage of the assessed valuation is if you’re going to be purchasing someone’s homestead property for back due taxes.
The successful bidder under a tax sale will receive what they call a certificate of title. Once you receive the certificate of title, then you’re the owner of the property. However, if you want to sell the property or obtain a mortgage on the property, you’re not in a position to do so because you don’t have what they call marketable title and you may have to go through a suit to quiet title and be able to clear the title. At Waller & Mitchell, we offer that service for a flat fee of $1,500.00 plus the cost, which would run somewhere between $500.00 and $1,000.00. Another way of clearing the title is if you hold the title that you received from the clerk’s office from the tax sale for four years, you may be able to avoid having to go through the suit to quiet title, as far as that’s concerned.
So that’s how you go about a tax sale: you have to go through the process of obtaining a tax certificate and having at least two years of tax certificates issued before you’re able to apply for a tax deed and then there’s an auction that a third party can come in and big more than what the taxes are. You don’t have the ability to force anyone to pay the taxes, so your money’s tied up until someone applies for a tax deed or the owner decides to pay the back due taxes.
If you have any more questions about the tax deed or you have one that you want the title cleared, give me a call at (727) 847-2288. Thank you.
- Published in Real Estate, Videos
Can I Prepare Estate Planning Documents for My Relative with Dementia?
Video Summary
I have a question from one of our clients who has inquired as to whether or not they can do estate planning for one of their loved ones that’s suffering from dementia. Unfortunately, you can’t do estate planning for someone else. That’s something that they must do. Depending on what stage of dementia they’re suffering from, they may or may not still have the mental capacity to sign the estate planning documents. The test is whether they understand who their natural beneficiaries would be, such as children. Also, they must be able to have some idea of the extent of their assets.
So if they understand who they would ordinarily leave their money to or who it would go to under the laws of the state of Florida if they don’t have a will, and also, the extent of their money, it may be advisable to complete all estate planning before that person’s capacity diminishes further and it’s too late. If someone’s in the early stages of dementia, they still may have the mental capacity to make a will, but you can’t make a will for someone suffering from dementia or someone that’s not. It’s something that that person must do.
If you have any questions about that, please give us a call at (727) 847-2288. Thank you.
- Published in Estate Planning, Videos
How Will a Short Sale Affect My Income Taxes?
Video Sumamry
How will a short sale affect my income tax? Well, there’s any number of questions that have to be answered before I can give you an answer to that question. The first question is: Is this your primary residence? If it’s your primary residence, there’s federal legislation involved that may excuse you from having to pay any taxes on the sale of your home. If you have the original mortgage and you’re short selling, then the lender will not send you what they call a “1099-C”, which is a report to the Internal Revenue Service that you’ve experienced gain from the sale of your house and therefore, you may be obligated to pay income tax on the long-term capital gains.
If you do receive a 1099 for the sale of your residence, then you may not have to pay taxes. You have to file a tax return and show the sale. However, if you’ve lived in your home two out of the past five years and own the home during that period of time, then you could exempt up to $250,000.00 of gain and that usually eliminates the problem.
Now, let’s say that this is not your primary residence and this is investment property. Well, then if you have a short sale and the lender sends a 1099 to you, then you will have to pay long-term capital gains. You may also have to recapture the deductions for your depreciation that you’ve taken on your rental property. So the best thing to hope for on all these situations if it’s not your primary residence is they don’t send you a 1099 and you take that up with your accountant on how you should report the transaction.
Also, another problem that I’ve been seeing some of my clients experience is a 1099-A and that says the property’s been abandoned and I’m really not sure just how the accountants are treating it because your debt may not be forgiven and they still send this 1099-A to you.
So if you have any more questions about it, give me a call. I’d be glad to talk to you about it. My phone number is (727) 847-2288. Thank you.
How WIll a Foreclosure Affect My Income Taxes?
Video Summary
How does a mortgage foreclosure affect your income taxes? Well, it should not affect your income taxes because the lender has not forgiven any of the debt on your loan after they conclude a mortgage foreclosure, so you should not receive a 1099-C, which is a report to the Internal Revenue of how much debt has been forgiven. So therefore, you should not have any tax consequences as a result of a foreclosure action.
I have seen lenders send out what they call a 1099-A and that is a report to the Internal Revenue Service that the property has been abandoned. That doesn’t mean that the debt has been forgiven and therefore, I am uncertain as to how the accountants are dealing with 1099-A’s whenever your property has merely been foreclosed.
So if you have any other questions about a 1099-C or a 1099-A, please give me a call at (727) 847-2288 and we can discuss it. Thank you.