Employment tax penalties abated even though not first-time offense

In Custom Stair, the Court determined that Custom Stairs’ failure to make the deposits, in the context of the cascading penalties encountered here, was due in significant part to Hurricane Ivan, the 2008 economic collapse, and the practical fact of the cascading penalties themselves.  [Read more…]

IRS reads “it is my desire” in decedent’s will to be a specific bequest rather than precatory, causing a reduction in the marital deduction

In PLR 1126030, the language “it is my desire” in Article III of Decedent’s Will was determined by the IRS to be given mandatory construction as passing the described property interests to the Decedent’s children as specific bequests, thereby reducing the marital deduction under § 2056 and increasing the taxable estate, taking into consideration the rules of abatement under Statute in regard to Decedent’s debts and obligations. [Read more…]

Tax Court ruling holds CEO could deduct legal fees incurred in defending against suit by disgruntled investor

In Ramig, TC Memo 2011-147, the Tax Court has concluded that a chief executive officer (CEO), who was also a board member and minority shareholder, could deduct legal fees in defending against charges that he made misrepresentations to an investor in the company. The legal fees were deductible under Code Sec. 162 as the ordinary and necessary expenses of his business of rendering services to his company as an employee.  The IRS argued that the suit
was against Ramig personally, not as CEO of the company, and that the expenses of defending the suit were therefore unrelated to the conduct of a trade or business.

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

I signed a P & S to buy a condo in Naples, FL, now I’ve changed my mind.

Additional Information:

I agreed to buy a condo in Naples, FL and now I’ve decided that it’s not what we want, we’d be making too many concessions.  How do I cancel with the least financial expense?

ATTORNEY ANSWER:

When a buyer enters into a Purchase and Sale Agreement, the buyer needs to be aware that the only reason he or she can get out of the agreement is if the mortgage is denied, the property is damaged to a certain degree or if there is a cloud on title that is not easily resolved.  Changing one’s mind is not a valid reason where one’s deposit will be returned and the Seller is in fact entitled to retain the entire deposit as liquidated damages.  The Buyer can try to negotiate with the Seller and explain his or her circumstances and see if the Seller is willing to give back a portion of the deposit.

[Read more…]

IRS is redesigning Form 3800, General Business Credit

On its website, IRS has posted drafts of the 2011 Form 3800, General Business Credit, and its instructions. They reveal that IRS is in the process of redesigning Form 3800, General Business Credit, for the 2011 tax year. [Read more…]

Mark S. Gardner, TC Memo 2011-137

The Tax Court decided in Memorandum 2011-137  that a self-employed contractor who regularly retained the properties he built or improved for their rental income was considered an investor. [Read more…]

PLR 201119003

In PLR 201119003, the Internal Revenue Service ruled that certain purchases and sales between a Marital (QTIP) Trust and the surviving spouse’s step-children pursuant to a valid, arm’s-length settlement agreement will not trigger gifts among the parties and will not result in a disposition of the life estate in the QTIP trust under section 2019 of the Internal Revenue Code.

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

Seller has requested an extension of 30 days, what happens if we do not agree?

Additional Information:

We are in the process of buying a home in Danvers, MA but the seller is unable to find a replacement property by the time the sixty day escrow closes. They have requested an extension of thirty days. If we do not agree to that extension, what will happen?  Will we lose the appraisal fee, the home inspection fee, and our deposit?  If we do agree, do we get any thing in return?

ATTORNEY ANSWER:

In a standard Purchase and sale agreement where the parties have agreed to close on a certain date and the seller agrees to vacate on or before the closing date and there is no provision saying the sale is subject to the seller finding replacement housing, then the Seller has no legal right to postpone the closing.  Unwilling or unable to move out is not a valid reason to extend the closing date unlike a title issue where Seller does have an automatic 30 day extension  built into the Purchase and Sale agreement.  However, Buyer may accommodate Seller’s desire to extend and ask Seller to reimburse him or her for any additional fees incurred due to the lender fees involved for such extension.  If the Seller is unwilling to cover the additional costs and will not close on time, then Buyer will need to consider whether the costs of taking legal action is worth the additional extension fees, if any.
[Read more…]

Ninth Circuit Affirms Tax Court in Estate of Jorgensen v. Commissioner

The Ninth Circuit Court of Appeals has affirmed a March 2009 memorandum opinion of the U.S. Tax Court which held that a decedent’s estate included assets that she transferred to two family limited partnerships. There was no bona fide sale, and she retained control over the assets transferred.

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

Interim Guidance for Conducting Trust Fund Recovery Penalty Investigations in Cases Involving a Third-Party Payer

The  IRS Small Business/Self-Employed (SB/SE) Division has issued an internal memorandum SBSE-05-0711-044  which provides interim guidance concerning Internal Revenue Code (IRC) § 6672 and its application to Trust Fund Recovery Penalty (TFRP) investigations in cases involving third-party payer arrangements. [Read more…]

Statute of Limitations is tolled if excess Roth IRA contributions are not reported on return

The Tax Court’s decision in Paschall, (2011) 137 TC No. 2 held that the statute of limitations for assessing the excise tax on excess contributions to a Roth IRA remains open where a taxpayer fails to report the contributions on his return. The excess contributions in the case were caused by an attempt to use a so-called “Roth restructure” transaction to disguise excess contributions to the taxpayer’s Roth IRA. The taxpayer also was held liable for additions to tax under Code Sec. 6651(a)(1).

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

Tax Court has held in Baral that payments made to caregivers qualifies for medical deduction

The Tax Court has held in Estate of Lillian Baral, (2011) 137 TC No. 1 that payments made to caregivers for providing physician-ordered assistance and supervision to a patient suffering from dementia qualified as long-term care services under Code Sec. 7702B(c) and were thus deductible amounts paid for medical care under Code Sec. 213(d)(1)(C).

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

IRS offers nationwide “Fresh Start” open house on Saturday July 16, 2011

The Internal Revenue Service will open the doors to dozens of its Taxpayer Assistance Centers across the country this coming Saturday, July 16, 2011, to answer taxpayer questions and provide help with tax filing issues. [Read more…]

Illinois has revised its power of attorney statute to address elder abuse

Illinois has enacted Public Act 96-1195 in an effort to curb the rise of financial abuse on elders by their agents under the power of attorney.

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

Domestication of foreign corporation ruled a tax-free reorganization

In PLR 201126023 the IRS has ruled that (1) the domestication of a foreign corporation would be considered a reorganization under Code Sec. 368(a)(1)(F); (2) such domesticated company could elect to be considered an S corporation on the date it became domesticated; and (2) the trusts that wholly-own the domesticated corporation were eligible to elect to be treated as electing small business trusts (ESBTs).

Source: International Tax Updates on Checkpoint Newsstand

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

Ins and outs of multi-state estate planning and probate

July 2011
Author: Attorney David M. Beliveau
Published by: Massachusetts Lawyers Weekly

It is becoming more common for estate planning attorneys to have clients who own real estate in multiple states. Whether it is a cottage on a lake in New Hampshire or a snowbird getaway in Florida, understanding the similarities and differences of estate planning and probate law in the states most commonly encountered by Massachusetts attorneys is essential to competently managing such matters.

All three states have common estate-planning documents, including revocable trusts, last wills and testaments, financial durable powers of attorney and health care directives.

[Read more…]

IRS issues private letter ruling on disclaimer executed by an estate

In PLR 201125009, IRS has privately ruled that a disclaimer made by a decedent’s estate of her deceased husband’s retirement benefits (including benefits that would have been payable under a disclaimer trust set up by his will) was a qualified disclaimer under Code Sec. 2518 of those benefits that were not yet accepted. As a result, the disclaimed benefits passed outright to the couple’s children.

Margaret L. Cross-Beliveau, Esq., LL.M.

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

FUTA surtax no longer in effect starting July 1, 2011

Beginning July 1, the 0.2% federal unemployment tax (FUTA) surtax is no longer in effect. The surtax was part of the 6.2% gross unemployment tax rate that employers pay on the first $7,000 of wages paid annually to each employee (6% permanent tax rate, 0.2% temporary surtax). The surtax had been in effect in every year since 1976, when it was enacted by Congress on a temporary basis. The FUTA tax rate, before consideration of state unemployment tax credits, is 6.0%, effective July 1, 2011. [Read more…]

Florida Legislature Says “No” to Millions in Federal Funding for Aging in Place

A Florida legislative panel Friday rejected millions in federal money designed to help remove patients from nursing homes and provide them with similar care in their own homes.

Source/more: Associated Press/Bradenton.com (June 24, 2011)

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

Florida Governor Signs Bill on Public Employee Pensions; Lawsuit Looms

Despite a lawsuit from the Florida Education Association and other public worker unions, Gov. Rick Scott signed Senate Bill 2100 into law, and now all government employees must contribute three percent of their salaries to the Florida Retirement System. Scott said that the new bill will save taxpayers and employers roughly $2 billion a year. The new law will be in effect starting July 1, 2011.

Source/more: WTSP News Channel 10 (June 23, 2011)

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

Massachusetts Secretary of State Wants More Regulation of Power of Attorneys

Massachusetts doesn’t regulate powers of attorney — a signed, notarized letter of appointment is the only requirement — and advocates for the elderly say the absence of oversight makes it too easy for an unscrupulous person to exploit the position for personal gain. Secretary of State William Galvin aims to remedy the problem with a proposal he submitted to the Massachusetts legislature earlier this year that would bar people with power of attorney from enriching themselves or otherwise abusing their authority.

Source/more information: Boston Globe (June 25, 2011)

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

IRS releases draft version of Form 8938 for foreign financial asset holders

IRS is seeking comments on new draft Form 8938, “Statement of Specified Foreign Financial Assets,” which is available on IRS’s website. Form 8938 will be used by individuals to report an interest in one or more specified foreign financial assets under Code Sec. 6038D. [Read more…]

A critical business question: Should you incorporate or not?

One of the first decisions you face as a new business owner is whether or not to incorporate the business. The biggest advantage of incorporating is limitation of your liability. Your responsibility for debts and other liabilities incurred by a corporation is generally limited to the assets of the business. Your personal assets are not usually at risk, although there can be exceptions to this general rule. The trade-off is that there is a cost to incorporate and, in some cases, tax consequences.

  • Should you incorporate?

You might not need to incorporate. Depending on the size and type of your business, liability may not be an issue or can be covered by insurance. If so, you could join millions of other business owners and operate as an unincorporated sole proprietor.

If you do decide to incorporate, you’ll face a choice of corporate forms. All offer limitation of your liability, but there are differences in tax and other issues. [Read more…]

Summertime tax tips

Summertime fun can be made even more enjoyable by adding tax savings. Here are some tax-saving ideas to consider.

• If you have summer travel plans and the primary purpose of your trip is business, you can deduct all the travel costs to and from your business destination and all other business-related costs even if you add on a few extra days for pleasure. You can’t deduct costs related to the pleasure portion. Including a spouse or friend on your trip is permissible, but you can’t deduct the additional costs for that person.

• If you itemize your deductions, you can deduct the mortgage interest and property taxes paid for your vacation home. A boat or RV can qualify as a vacation home if it has sleeping quarters, cooking facilities, and a bathroom. If a retreat also serves as rental property, you can control your tax deductions by changing the number of days you use it for vacation. [Read more…]

Look into the benefits of a solo 401(k)

Have you heard about solo 401(k) plans? The traditional type of 401(k) retirement plan is now available for self-employed individuals. And it lets you save more than other types of plans.

In the past, 401(k) plans were typically offered by larger corporations. Employees could make pre-tax contributions by payroll deduction. The company would then usually match a percentage of those contributions. Investments grew tax-free until withdrawn at retirement. One advantage of a 401(k) plan is the relatively large amount you can contribute each year – $16,500 in 2011 with an extra $5,500 catch-up if you’re 50 years old or older. [Read more…]

Do surviving spouses have a right to a 401(k) or an IRA?

When choosing a beneficiary for a retirement plan, it’s important to understand how your spouse will be treated under the plan. The rules are different for 401(k)s and IRAs. With a 401(k) plan, a surviving spouse is the automatic beneficiary of the plan. If you want to name someone other than your spouse as a beneficiary, your spouse must agree to this in writing.

There are some exceptions; for example, the rule might not apply if you and your spouse have been married for a very short time. But in general, it’s a strict rule. In fact, even if your spouse signed a prenuptial agreement saying that he or she has no right to your 401(k), that might not be good enough, because he or she wasn’t your “spouse” at the time of the signing. On the other hand, this rule is not true for an IRA. Surviving spouses are not automatic IRA beneficiaries.

In a recent case, a husband rolled his 401(k) into an IRA after he retired. He named his children as the IRA’s beneficiaries. After he died, his wife claimed that she was entitled to the account funds as his surviving spouse. She argued that because her husband had rolled his 401(k) into the IRA, she should receive the same protections that the 401(k) had given her. But a federal appeals court in California disagreed, deciding that the IRA rules applied even if the funds originated in a 401(k).

In general, whether you have a 401(k) or an IRA, it is important to regularly check your beneficiary designations to make sure they are current and fit with the rest of your estate plan.

Here’s yet another example of why trusts in a will are a good idea

In a recent case, a Texas man inherited $400,000 in cash from his aunt. The man’s ex-wife went to court and claimed that as a result, his child support payments should be increased. The Texas Court of Appeals agreed with the ex-wife. It said that even though the $400,000 wasn’t wages or earnings, it was still a “resource” that had to be considered in determining how much the father had to pay for his two children.

Now, we don’t know what the aunt’s feelings were. It’s entirely possible that she was happy to use her money to take care of her nephew’s children. However, she probably never considered that after her death, a large portion of her assets would end up under the direct control of her nephew’s ex-wife. It’s a good bet that the aunt might have been happier if she had put the $400,000 into a trust that would benefit the nephew and his children. In that way, she would have had control over how the money was spent for their benefit – rather than the ex-wife. [Read more…]

…More implications of the new tax law from Congress

The new tax law, which temporarily raises the estate and gift tax exemptions to $5 million, has many important implications. Almost everyone should have their estate plan reviewed in light of this significant change.

Here are just a few of the other important consequences:

  •  Many wills that were drafted years ago need to be revised right away. Frequently, these wills were set up to avoid taxes by giving children an amount of property equal to the estate tax exemption, and having the rest go to the surviving spouse. For instance, if the exemption amount were $600,000, then $600,000 would go to the children (or to a trust for the children), and the rest would go to the surviving spouse (or a trust for the spouse). [Read more…]

Congress creates ‘window’ in 2011 and 2012 for big tax savings

Congress has created a temporary “window” – between now and the end of 2012 – in which many people can save a lot of money in estate and gift taxes. You might be able to take advantage of this opportunity by transferring significant assets to a trust. But as they say on TV, hurry – this is a limited-time offer from the federal government.

During 2011 and 2012, the federal estate tax exemption will be $5 million, meaning the tax will be applied only to estates that are larger than that. Importantly, the lifetime exemption from the federal gift tax has also been raised, from $1 million to $5 million. The gift tax applies to transfers of assets. In general, any person can give any person up to $13,000 a year without there being any gift tax. If you give someone more than $13,000 in a calendar year, then the excess is subject to gift tax. [Read more…]

In Comm. v. Simmons, Court approves charitable deduction for donation of conservation easements on building facades

In Comm. v. Simmons, (CA DC 6/21/2011) 107 AFTR 2d ¶ 2011-966, the Court of Appeals for the District of Columbia Circuit, affirming the Tax Court, has held that a taxpayer was entitled to charitable contribution deductions for her donation of conservation easements on the facades of two buildings located in a historic district. The Court rejected IRS’s contention that her contribution wasn’t exclusively for conservation purposes, as required by Code Sec. 170(h)(1)(C), and that she failed to obtain qualified appraisals under Reg. § 1.170A-13(c)(3)(ii).

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

Jilted woman gets compensation from ex-fiancé

Being dumped by the person you were planning to marry is an emotionally wrenching, if not humiliating, experience. But can you sue over it? It’s highly unusual, but a few states allow this type of lawsuit. It helps if you can show that you actually lost money as a result of the runaway bride or groom, as opposed to simply being embarrassed.

In a North Carolina case, Crystal Dellinger began dating her boyfriend, Cliff Barnes, while she was still in high school. After graduation, she helped Barnes run a convenience store he had purchased. Later, she agreed to help Barnes open a second store instead of looking for a job. Ultimately she helped him establish four stores, working without pay for a year so he could put the profits back into the business. When Barnes asked her to marry him, he promised he’d sell all the stores once day and she’d never have to worry about money. She accepted. [Read more…]

Divorce settlement reopened because of mistake

When a couple agrees to a divorce settlement, it’s generally final. But in some instances, a judge might allow a couple to reopen it and change the terms if they later realize they made an honest mistake – such as that their property wasn’t worth as much as they thought. For example, when a wealthy New York lawyer and his wife divorced, they agreed to split their property, which included a $5.4 million investment account, right down the middle. Unfortunately, the account was invested with the notorious Wall Street fraudster Bernard Madoff.

Madoff’s ponzi scheme wasn’t revealed until after the husband had already paid the wife $6.6 million, including her share of the investment account, which was actually worthless. The wife argued that she was still entitled to the full amount of the settlement. But a New York appeals court agreed with the husband that the settlement should be set aside due to a “mutual mistake.”

Same-sex partners entitled to custody rights

The issue of whether same-sex partners are entitled to custody rights continues to produce different court decisions around the country. In one recent case, a North Carolina woman conceived a child through artificial insemination, and her partner sought to adopt the child. A judge allowed the adoption. When the couple later split up, the partner sought parental rights.

The state supreme court first decided that the adoption was invalid (despite what the judge had ruled), because North Carolina law doesn’t allow for adoption in this situation.

However, the court went on to say that joint custody was nevertheless appropriate in this case, because it was in the best interests of the child. [Read more…]

Wife collects support for helping husband launch career

A woman who worked full-time while her husband was in dental school is entitled to “compensatory” support for her role in launching his $350,000-a-year dental career, the Oregon Supreme Court recently ruled. Once her husband had established his practice, the wife focused on homemaking and childcare responsibilities, though she also worked part-time in the dental office for several years.

The court said the wife’s contribution to her husband’s education, training and vocational skills was a significant factor behind his earning capacity. Accordingly, she was awarded $2,000 a month for 10 years, in addition to $3,000 a month in “transitional” spousal support and $4,000 a month in maintenance. [Read more…]

You be the divorce judge

A lot of difficult questions can come up in a divorce case. Check out the following situations and see if you can figure out what the court decided. You be the judge! But remember – the actual outcome can vary from state to state, and depends on the exact facts of each case.

  • A wife’s 401(k) plan was worth $164,000 when she filed for divorce. By the time of the divorce trial, however, it was worth $235,000. The husband was awarded half the value of the plan. Should he get half of $164,000, or half of $235,000?

He should get half of $235,000, said the Iowa Court of Appeals.

The wife argued that her husband shouldn’t benefit from her continuing contributions to the account, but the court disagreed, because the couple was still married during that time. [Read more…]

U.S. agency moves to ban housing discrimination against gays

The U.S. Department of Housing and Urban Development has proposed regulations that would ban discrimination against gay people in federally-assisted housing programs. The new rules would prohibit lenders from discriminating based on sexual orientation in offering FHA-insured mortgages. They would also prohibit discrimination in HUD programs including public housing, Section 8 vouchers, and multi-family housing assisted through HUD funding.

Currently, the Fair Housing Act prohibits discrimination in renting, selling and mortgage lending on the basis of race, color, national origin, religion, sex, disability and family status. The new rules say that “family status” includes the fact that someone is gay, lesbian, bisexual, or transgendered. HUD is accepting comments on the proposed rules and expects to make a final version official by the end of 2011.

While there is currently no federal law concerning discrimination against gays in housing, there are discrimination bans in effect in roughly 20 states and more than 150 cities and towns in the U.S.

New reverse mortgage option could help some seniors

A new type of reverse mortgage that could benefit some senior citizens has been approved by the Federal Housing Administration. In a traditional mortgage, you borrow money against your house and pay it back in monthly installments over time. With a reverse mortgage, you borrow money against your house, but you don’t have to pay it back until you die, sell the house, or move – which means you don’t owe anything as long as you stay in your home.

In most cases, to qualify you must be at least 62 years old. Reverse mortgages have been criticized in the past because they can involve high fees. For instance, in a traditional reverse mortgage, a borrower had to pay 2% of the loan amount as mortgage insurance. On a $250,000 mortgage, that amounted to a $5,000 fee. [Read more…]

FHA makes it easier to ‘flip’ properties

The Federal Housing Administration has extended a program designed to make it easier for investors to “flip” foreclosed and other depressed properties by buying them, rehabbing them, and quickly selling them to homebuyers. Ordinarily, investors who buy a property with an FHA-insured loan are not allowed to sell the property until at least 90 days after the purchase. However, the FHA now says it won’t enforce this rule until at least the end of 2011.

The FHA is trying to encourage investors to quickly rehab depressed properties in order to stabilize home values and prevent neighborhood blight. Investors are often able to rehab and flip a foreclosed property in less than three months, the FHA says.

The FHA initially waived the 90-day rule back in February 2010. At the time, it said the waiver would only last a year, but it has extended it. During the first year of the waiver, some 21,000 homes with FHA-insured mortgages were resold within 90 days. The total value of those mortgages was more than $3.6 billion. Investors like the ability to resell within 90 days because it lowers their transactional costs and prevents properties from sitting idle, which can lead to vandalism and other problems.

Office rents edge higher – for the first time in a while

The average office rent in the U.S. edged slightly higher at the end of 2010 – to an average of $22.09 per square foot. That’s an increase of only 0.2 percent, but it’s the first increase in almost three years, which suggests that the long slump in rental rates may be coming to an end as the economy slowly improves. Back in early 2008, the national average was above $25 per square foot.

The total amount of leased office space in the U.S. has also slightly increased. From the beginning of 2008 through September 2010, the total amount of leased office space in the U.S. fell an astonishing 137.8 million square feet. In the last three months of 2010, though, the figure increased by 2.5 million square feet –not much, but a clear change in direction.

The average vacancy rate is 17.6 percent, and is the highest since 1993. The situation varies greatly from market to market, according to Reis, Inc., a company that compiles these figures. Some markets are coming back strongly, while more overbuilt areas such as Phoenix and Las Vegas are still seeing low rents and high vacancies.

15-year mortgages become more popular

There’s been a spike in interest recently in 15-year mortgages, particularly for people who are refinancing.

In general, the recent financial crisis has made people more wary of debt and more eager to pay it off. Back before the crisis, many people were happy to take on more debt and pay it off over a longer period of time. But today, a lot of people want to get rid of debt as quickly as possible, even if it means higher monthly payments.

Between 2007 and 2009, the percentage of people refinancing who opted for a 15-year mortgage doubled – from 9 percent to 18 percent. [Read more…]

What you don’t know about private mortgage insurance (but should)

As a general rule, borrowers have to obtain private mortgage insurance if their down payment is less than 20% of the value of the home. But what many people don’t realize is that there are a number of different options for the way this insurance, called PMI, is handled. Some of these could reduce your monthly payment or save you money in the long term.

PMI is a bigger issue than it used to be. For one thing, lenders are very strict about requiring it these days. Five years ago, at the height of the boom, some lenders didn’t always require PMI in every case where it was applicable, but that’s no longer true. [Read more…]

Understanding the differences between a will and a trust

Everyone has heard the terms “will” and “trust,” but not everyone knows the differences between the two. Both are useful estate planning devices that serve different purposes, and both can work together to create a complete estate plan. One main difference is that a will goes into effect only after you die, whereas a trust can take effect as soon as you create it. A will is a document that directs who will receive your property at your death and appoints a legal representative to carry out your wishes. By contrast, a trust can be used to distribute property before death, at death, or afterwards.

A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for the benefit of another person, called a “beneficiary.” A trust often has two types of beneficiaries – one set that receives income from the trust during their lives, and another set that receives whatever is left over after the first set of beneficiaries dies. [Read more…]

Do surviving spouses have a right to a 401(k) or an IRA?

When choosing a beneficiary for a retirement plan, it’s important to understand how your spouse will be treated under the plan. Surviving spouses are treated differently under 401(k)s and IRAs. In general, 401(k) plans provide protections for surviving spouses that IRAs don’t. 401(k) plans are governed by a federal law known as ERISA. Under this law, a surviving spouse is the automatic beneficiary of a retirement plan. If an employee wants to name someone other than a spouse as a beneficiary, the spouse must consent to this in writing. (There are some exceptions; for example, the spouse may have to be married to the employee for a certain amount of time). IRAs are not governed by ERISA, however, so they don’t include the same protections for spouses. Importantly, this is true even if a 401(k) is rolled into an IRA.

In a recent legal case, a husband rolled his 401(k) into an IRA after he retired. He named his children as the IRA’s beneficiaries. After he died, his wife claimed that she was entitled to the account funds as his surviving spouse. She argued that because her husband had rolled his 401(k) into the IRA, she should receive the same protections that the 401(k) had given her. But a federal appeals court in California disagreed, deciding that IRAs aren’t governed by the ERISA rules even if the funds originated in a 401(k). [Read more…]

Free preventive care is now available under Medicare

The new health reform law that took effect on January 1, 2011 includes free preventive services for Medicare recipients. Under the law, people with regular Medicare will no longer have to pay a co-pay, coinsurance or deductible to receive preventive services that are highly recommended by the U.S. Preventive Services Task Force – including screenings for breast cancer, colon cancer, diabetes and heart disease, as well as smoking cessation counseling. Private Medicare plans (known as Medicare Advantage plans) may still charge for these services, but many do not.

Also under the new law, Medicare Part B beneficiaries can now receive an annual wellness visit free of charge. During this yearly visit, your doctor or other health practitioner recognized by Medicare (such as a nurse practitioner) will update your medical history and current prescriptions; measure your height, weight, blood pressure and body mass index; create a schedule over the next 5 to 10 years to screen for diseases; and screen for cognitive issues as well.

And Medicare now pays in full, without co-pays or deductibles, for the initial “Welcome to Medicare” program that Medicare has offered since 2005 to beneficiaries within 12 months of their becoming covered under Part B. For a detailed list from the Medicare Rights Center of preventive services that will no longer require out-of-pocket payments, go to: http://bit.ly/a5gVTV.

New reverse mortgage product has lower upfront costs

A new product is making “reverse mortgages” more affordable. Reverse mortgages typically have high fees, but the new “Saver” reverse mortgage allows borrowers to dramatically lower their upfront costs – as long as they’re willing to borrow a smaller amount.

A reverse mortgage allows homeowners who are at least 62 years old to transform the equity in their home into liquid cash without having to move or make regular loan repayments. The homeowner receives a sum of money from the lender, usually a bank, based on the value of the home, the age of the borrower, and current interest rates. The loan doesn’t have to be repaid until the last surviving borrower dies, sells the home, or permanently moves out. [Read more…]

What you need to know about signing up for Medicare

The first of the 78 million baby boomers turned 65 on January 1, 2011, and about 10,000 boomers a day will be reaching that age between now and 2030. If you’re among those about to turn 65, then it’s time to think about Medicare.
You become eligible for Medicare as soon as you turn 65, and delaying your enrollment can result in penalties.
Medicare consists of four major programs:
• Part A covers hospital stays.
• Part B covers doctors’ fees.
• Part C allows you to receive additional types of coverage such as vision and dental insurance.
• Part D covers prescription drugs. [Read more…]