Legal Articles

Bank slapped with fine after failing to modify loan terms

In a move called “unprecedented in its magnitude,” a bankruptcy judge recently opted to levy a $45 million fine against Bank of America Corp. for its treatment of homeowners who had requested lower mortgage payments.

If it stands, the fine would be the largest punitive damages award for violations of the bankruptcy law’s automatic stay rules, which ban lenders from advancing foreclosures and taking other actions.

The case highlights the importance of consulting a lawyer in any situation involving requests for loan modifications or in any case involving a foreclosure. [Read more…]

What you need to know about paid leads on property-search sites

Popular property-search site Streeteasy.com recently rolled out a change to its Premier Agent program for real estate agents that is confusing potential buyers and angering brokers.

Until recently, the site featured the name of a property’s listing agent and company prominently, making the main contact clear and providing a direct “contact agent” button. But now when a potential buyer clicks “contact agent,” the message instead might be sent to a broker who has paid to receive referrals for a specific zip code.

The listing broker can still be reached, but the process is more convoluted. Now users must click on a less prominent button that says “seller’s agent info.” The name of the listing broker and firm are much further down on the page and harder to find. [Read more…]

What to consider before backing out of an offer

Standard real-estate contracts contain inspection and mortgage contingencies that allow buyers a limited amount of time to back out of the contract and receive a refund of their deposit. They also spell out the terms of the deposit and where the money is held in escrow, whether with the buyers’ agent, the title company, an attorney or the developer.

But once all contingencies are satisfied, buyers are locked in and attempts to back out could mean losing earnest money and potentially having to pay brokers’ commissions. That’s because even if the seller lets the buyer off the hook, he or she may still be liable to the broker for the commission. Contracts state that the commission is due when the broker finds a ready, willing and able buyer. Some brokers will work with the seller in this situation, but not all will.

If a buyer truly does want to back out of a deal, even if he can’t do so under the terms of the contract, he can try to negotiate with the seller for the return of at least part of the deposit. [Read more…]

Don’t let the end of a home-equity line of credit sneak up on you

The terms of home-equity lines of credit, or HELOCs, typically come due 10 years in, at a time at which many homeowners are unprepared for the fact that their monthly payments are about to go up significantly and sometimes double.

HELOCs are secured by a mortgage, require only interest payments and can be used to consolidate debt, fund major expenses, etc. But after the initial 10-year period the principal becomes due. At that point, homeowners can choose to pay off the balance, refinance it into a first or second mortgage or make monthly payments of principal and interest, typically for a 20-year term.

Homeowners who are unprepared may wind up defaulting, prompting the bank to take legal action to collect the balance or to begin the foreclosure process. [Read more…]

Reverse mortgages offer cash to homeowners, but it comes at a price

A reverse mortgage allows a homeowner to convert part of the equity in a home to cash without having to sell the property. The cash may be paid in installments or a lump sum, so typically you don’t need to pay anything back as long as you live in your house.

Factors such as age, the value of the property and how much remains on the mortgage all affect the amount of money a homeowner may borrow through a reverse mortgage.

There are important things to consider. Owners typically must remain in the home for at least 5-10 years to make a reverse mortgage economical. In addition, because they’re deferring repayment of the reverse mortgage, the amount they owe will grow substantially over time. Interest charges are added to the loan each day it’s held, so it’s possible the reverse mortgage could grow to equal the value of the home. [Read more…]

Investing IRAs in real estate often leads to more risk than reward

 There’s nothing simple about investing an IRA in real estate. But people do it because it offers an alternative to traditional retirement accounts that comes with the potential for high reward. Potential investors should be warned, however, that there can be more negatives than positives associated with these types of investments.

Minuses

  1. The IRS requires a qualified trustee or custodian to administer the assets. This person will typically handle transactions and manage paperwork and reports.
  2. The options for a qualified trustee or custodian are limited. So far, only about two dozen companies in the U.S. can act as custodians of self-directed IRAs.
  3. You’ll need to hire a property manager. A third-party property manager will make sure you adhere to any applicable landlord-tenant laws and avoid illegal transactions. Typical commissions are equal to the first month’s rent and 6 to 10 percent of the monthly rent thereafter.
  4. The rules for self-directed IRAs can be tricky to follow. Did you know something as simple as mowing the lawn of a property you own through your IRA could put you on the wrong side of the law? It’s true: IRA owners are forbidden from engaging in certain transactions at their property.
  5. The penalties are high. Running afoul of the law makes IRA owners more susceptible to losing the IRA’s tax-favored status. If that happens, taxes and penalties could be triggered.
  6. It’s cash only. IRS rules require contributions to an IRA to be made in cash, not services.

[Read more…]

Business tax: time to consider Section 179?

Section 179 expensing can be a very powerful tax-planning tool for small- and medium-sized businesses acquiring capital assets. While it doesn’t change the amount of depreciation you can take over the life of a capital purchase, it can change the timing by allowing you to deduct your purchase in the first year you place it in service.

Review these details if you’re considering depreciating your business assets under Section 179:

  • Section 179 allows deducting the expense of up to $510,000 of qualified business purchases.
  • A Section 179 deduction cannot create a loss for the business.
  • A Section 179 deduction must be for business use. If an asset is not entirely used for business, the allowance is reduced.
  • If you sell a Section 179 asset prior to the full depreciation period, you will have to record any sales proceeds as taxable income.
  • Many states limit the use of this federal shifting of depreciation.

Taking Section 179 for capital purchases can be useful, but it’s not for everyone. Using it for an immediate tax break means it’ll no longer be available for future years.

Renew your ITIN now

If you have an Individual Taxpayer Identification Number (ITIN) rather than a Social Security number (SSN) you may need to take action or you’ll be unable to file a tax return for 2017.

What to know about ITINs
ITINs are identification numbers issued by the U.S. government for individuals who do not qualify to receive an SSN. An ITIN can be used to file tax returns and is also a form of identification often required by banks, insurance companies and other institutions. Unfortunately, ITINs are also a source of identity fraud. To combat this, the 2015 PATH Act made substantial changes to the program. Now a number of ITINs will expire if not renewed by December 31, 2017.

No ITIN, no problem. If you do not have an ITIN, but have an SSN, this expiration does not affect you. [Read more…]

How to Ace the FAFSA

The Free Application for Federal Student Aid (FAFSA) is a tool that students use to apply for more than $120 billion in federal funds. Unfortunately, each year many students miss out.

Even if you don’t think you or your child qualify for federal aid, filling out a FAFSA is important because it could be used to determine eligibility for nonfederal aid and private funds.

FAFSA available October 1, 2017
Previously, the FAFSA was unavailable until January. A recent change makes the application available October 1, 2017. That’s because the 2018-19 FAFSA can be completed with your 2016 tax info. [Read more…]

Tax Filing Reminders

  • October 16
    • Filing deadline for 2016 tax returns for individuals or corporations if you requested/received a six-month extension. Pay taxes due by this date.
    • Deadline to recharacterize a Roth IRA to a Traditional
    • Deadline to fund your Keogh or SEP plans if you requested a filing extension.

Password sharing presents risks for family and fiduciaries

Keeping careful records of the usernames and passwords for your online accounts and sharing them with a trusted family member or agent may seem like the start of a responsible estate plan. But you need to be aware of the risks for those you empower with the information.

Even with your permission, fiduciaries (executors, trustees, conservators), agents and family members who manage assets as part of your estate plan could be committing a federal crime by accessing your online account with your password.

That’s because most terms of service agreements governing websites or online accounts specify that passwords not be shared and that third parties not be allowed to access a user’s account.  So even if you provide the person with the log-in information for your account, he or she could still be violating the terms of service by using it to access your account. [Read more…]

Are LLCs your best option for asset protection? Know the risks

Limited liability companies can offer better asset protection than ordinary stock corporations, but there are potential adverse economic and tax results if investors are not alert.

Investors increasingly use LLCs to operate a trade or business, to hold real estate or to hold other investment assets, as opposed to state law corporations. But when investors transfer LLC interests to a spouse, children, trust or others, as opposed to ordinary corporate stock, they can risk losing control of the business or decreasing the basis for heirs — with a corresponding increase in the beneficiary’s income tax.

An LLC owner or “member” has two types of rights: economic and management. Economic rights allow them to receive property from the LLC both during existence and upon liquidation, along with tax attributes and profits/losses. Management rights allow them the right to vote, participate in management or the conduct of company affairs and have access to company reports, records and accountings. [Read more…]

What millennials need to know about estate planning

A recent survey by senior-living focused website Caring.com, quoted in USA Today, revealed that 78 percent of Americans under the age of 36 don’t have a will or trust in place. But even with youth on their side, the millennial generation needs to be planning for the unforeseen. If most would consider the following three issues, they’d be off to a good start:

  • Incapacitation provisions: No one expects to be incapacitated, but there are at least two documents needed in the event that occurs. The first is a durable power of attorney that identifies who will make financial decisions on your behalf if you are unable to do so. The second is a health care advance directive (including a living will) that outlines preferences for medical care if you are unable to state these for yourself.
  • Death documents: These include a last will and testament and possibly the establishment of a trust, either revocable or testamentary.
  • Beneficiary designations: Keep these up to date for things including life insurance and 401(k) programs.

[Read more…]

Protect your power of attorney from legislative changes

Medical and financial powers of attorney are a critical aspect of effective estate planning, but did you know they must be kept up to date? It is recommended to have them reviewed every 2-3 years.

Several legislative changes over the years have given financial institutions and healthcare providers reasons to reject powers of attorney. As new laws are enacted, necessary provisions must be incorporated into your power of attorney, as failing to including certain language could mean your documents will not be accepted.

Notable issues include:

  • Your medical power of attorney was executed prior to your state adopting the Uniform Health Care Decisions Act. In 1993, this federal law was approved to expand and solidify the authority of a medical power of attorney. It has since been enacted state by state. Key changes include decision-making power surrounding life-prolonging procedures, authorization for organ donation and approval for admission to health care facilities for treatment. [Read more…]

Learn from celebrities’ estate planning blunders

There are many lessons to be learned about estate planning from the bad experiences of some of the world’s most famous people. The AARP recently gathered their stories, and here are the highlights:

Florence Griffith Joyner: Before her death in 1998, Olympic gold medalist Florence Griffith Joyner never told anyone the location of her will. Without the original document, it took four years to close her probate estate due to a long battle among her relatives.

Lesson learned: Don’t keep the location of your will a secret. [Read more…]

Take care with COBRA compliance — or pay big damages

In recent months, at least four companies have gotten into trouble for failing to provide Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) notices to health plan participants.

Suits of this nature can lead to big damages. Since 2015, courts have approved settlements ranging from $290,000 to $1 million.

Damages include statutory penalties of $110 per day, awards to qualified beneficiaries as relief for damages that occur due to the failure to provide an adequate COBRA notice, and attorney fees. The IRS can also assess excise tax penalties of up to $200 per day for each day that a plan fails to comply with COBRA. [Read more…]

Tips for avoiding a data security breach

Regardless of the size of your business, it’s critical that you work proactively to protect the sensitive and private information of your customers, clients and employees.

While you might hear more often about data breaches at bigger companies, the reality is that smaller companies and organizations are often targeted and typically have limited data security protections in place.

Your approach to protecting your company from a data breach must be comprehensive. [Read more…]

New law reaffirms right to post negative reviews online

Under a new federal law, individuals have a right to post truthful negative reviews about a product or service provider. That’s the case even if they previously signed an agreement that prohibited such reviews.

Over the past few years, this controversial business practice of including non-disparagement clauses in contracts or terms of service has led to a number of lawsuits. These so-called “gag clauses” are intended to deter customers from writing negative reviews, and require them to pay a fee if they do so despite the contract.

The new Consumer Review Freedom Act bars companies from using these clauses.  It gives the Federal Trade Commission and the states the power to enforce the law, allowing them to take legal action against businesses that fail to remove these clauses from their contracts.   [Read more…]

Conduct a website self-audit to ensure compliance with the ADA

Over the past couple of years, more than 200 plaintiffs have sued businesses nationwide arguing that their websites fail to provide access to people with certain disabilities, alleging a violation of the Americans with Disabilities Act. More recently, a law firm based in Pittsburgh sent demand letters to businesses, banks and others saying that they were willing to “work constructively” toward compliance for a fee.

While court rulings on whether the ADA applies to websites have been mixed, plaintiffs have been using the rulings in their favor to persuade businesses to settle.

The ADA, which went into effect in 1990, prohibits discrimination against people with disabilities. Title III of the Act prohibits discrimination on the basis of disability in “places of public accommodation.” The law doesn’t specifically mention websites, but some plaintiffs argue that a website should be treated as a “place of public accommodation.”   [Read more…]

Social media endorsements: How to pay influencers to endorse your brand

It’s becoming popular for companies to pay social media users with big followings to endorse their products or share content about their brand. It’s a great way to get your message out to a wider network of target customers in an authentic way.

But the Federal Trade Commission (FTC) is paying attention and enforcing rules that say you can’t do it without disclosing the relationship.

Recently, the FTC reached settlements with such brands as Lord & Taylor and Warner Bros. Home Entertainment over their failure to disclose such relationships. [Read more…]

Contractor or Employee? Knowing the difference is important

Is a worker an independent contractor or an employee? As an employer, getting this wrong could land you with an IRS audit and cost you plenty in many other ways. Here’s what you should know:

As the worker: If the worker is a contractor and not considered an employee, he/she must:

  • Pay self-employment taxes (Social Security and Medicare-related taxes).
  • Make estimated federal and state tax payments.
  • Handle his/her own benefits, insurance and bookkeeping.

[Read more…]

Avoid These Common Tax Mistakes

There are nearly 1,000 different tax forms used by the IRS to report tax obligations. It’s no wonder the IRS faces thousands of tax returns with errors each year. Here are some of the most common:

Wrong names and Social Security numbers. Taxpayers regularly make mistakes by entering incorrect information for their spouses and dependents. If you recently married or divorced but haven’t yet changed your name with the Social Security Administration, you’ll need to file under your old name.

Errors in age and birthdate. Much of the tax code is based on age. Without the correct birthdate, your eligibility for tax benefits could be cast in doubt. [Read more…]

Say Goodbye to the College Tuition Deduction

Congress decided not to extend this $4,000 deduction for 2017, leaving many parents worried that college will now be more expensive. However, Congress left in place two popular education credits that may offer a more valuable tax break:

  • The AOTC. The American Opportunity Tax Credit (AOTC) is a credit of up to $2,500 per student per year for qualified undergraduate tuition, fees and course materials. The deduction phases out at higher income levels, and is eliminated altogether for married couples with a modified adjusted gross income of $180,000 ($90,000 for singles).
  • Lifetime Learning Credit. The Lifetime Learning Credit provides an annual credit of 20 percent on the first $10,000 of tuition and fees, for either undergraduate or graduate level classes. There is no lifetime limit on the credit, but only couples making less than $131,000 per year (or singles making $65,000) qualify. Unlike the AOTC, this deduction is per tax return, not per student.

[Read more…]

Tax Filing Reminders

  • September 15
    • Third quarter installment of 2017 individual and corporation estimated income tax is due.
    • S corporations: Filing deadline for 2016 tax returns for S corporations that requested/received a six-month extension.
    • Partnerships: Filing deadline for 2016 tax returns for partnerships that requested/received an automatic six-month extension.
    • Electing large partnerships: Filing deadline for 2016 tax returns for electing large partnerships that requested/received a six-month extension.
  • October 16 – Filing deadline for 2016 individual or corporation tax returns that requested/received a six-month extension. Pay taxes due by this date.

 

Employer can’t fire worker for refusing to share tips, Minnesota court rules

A server at a restaurant who was fired after refusing to share more of his tips with other workers could sue the restaurant for wrongful discharge, the Minnesota Court of Appeals recently decided.

Todd Burt, the server in question, worked at a restaurant where wait staff had to split tips with the people who bussed tables. When Burt refused to share his tips, his employer warned that “there would be consequences” if he didn’t do so. He still refused and was fired.

After his employer terminated him, he filed suit. Specifically, Burt claimed firing him was illegal under Minnesota’s wage and tip law, which prohibits mandatory tip pooling or tip sharing. His resulting unemployment caused him lost wages, he alleged. [Read more…]

NYC imposes new rules for freelance contracts

The nation’s largest city just passed a law that will change the way employers do business with independent contractors.

Under the new law, any agreement with an independent contractor for services that pays more than $800 in a 120-day period must be in writing. The contract must contain the name and mailing address of both the hiring party and the contractor, an itemization of all services to be performed, the value of the services, the rate and method of pay and the date by which the hiring party must pay. If no date is specified, the contractor needs to be paid within 30 days of the job being done.

Hiring parties that violate this law can face fines and lawsuits and can even be ordered to pay double damages and attorney fees. [Read more…]

Single day of FMLA abuse is grounds for termination, says 4th Circuit

United Airlines did not violate the federal Family and Medical Leave Act when it fired a worker for putting in for family leave on a scheduled workday in the middle of an extended out-of-country vacation, the 4th U.S. Circuit Court of Appeals recently ruled.

Masoud Sharif, who worked for United at Washington-Dulles International Airport, decided to take a 3-week vacation to South Africa in March 2014. However, United had scheduled him for two customer-service shifts right smack in the middle of his time off. Using United’s shift-swap website, Sharif found someone to cover the second day, but not the first. Then Sharif — who’d been previously diagnosed with an anxiety disorder and had been authorized to take FMLA days intermittently to deal with panic attacks — requested a day of medical leave for the first day.

The airline found it odd that Sharif took FMLA leave for the only shift he was scheduled to work those three weeks and that his time off coincided with that of his wife, also a United employee.  It also noticed he’d taken FMLA leave under similar circumstances a year earlier.  In an interview with human resources when Sharif returned, he claimed he tried to get back to Washington the day of his scheduled shift but couldn’t get on a flight and suffered a panic attack that caused him to use FMLA leave, although records showed he flew to Italy the next day to see his niece. [Read more…]

EEOC updates guidance on ‘national origin’ discrimination

Title VII of the federal Civil Rights Act bars employers from discriminating based on national origin. In other words, employers cannot fire, refuse to hire, demote or take any other negative action against a worker or job candidate based on where that person or his or her ancestors come from. Employers also can’t take negative employment actions against someone who seems to have physical, cultural or language traits that they associate with a particular ethnic or national group (i.e., having an Italian accent, wearing traditional Indian garb or having a stereotypically Jewish last name or facial features).

This area can be a minefield for employers, so the Equal Employment Opportunity Commission recently issued updated guidance for employers on how to stay out of trouble.

For example, with respect to job openings, the EEOC urges employers to advertise and recruit in ways that attract the most diverse candidate pool possible, such as posting online, advertising at job fairs and publicly posting job announcements with various community organizations, instead of using techniques that may “screen out” certain groups, such as word-of-mouth advertising or only posting in places that will reach a homogeneous audience. [Read more…]

Beware the use of ‘big data’ in hiring

As technology has advanced in recent years, so have hiring tools. Among these tools are “algorithms” — formulas developed by data analysts and computer programmers to help employers cut the hundreds or even thousands of online job applications down to a smaller number that meet certain stated job qualifications. This could include educational requirements or particular skills necessary for the position.

These algorithms also enable employers to subject applicants to personality tests and find online information about potential candidates, and even help the employer reach out to people who might be a good fit but haven’t actually applied.

However, these tools can also pose a danger. Employers may set the algorithms to look for candidates who look like their idea of a “top performer,” but this could lead to weeding out women, racial minorities, people with disabilities or other groups protected by antidiscrimination laws. [Read more…]

The Trump Administration: What should employers expect?

Since the moment he announced his candidacy nearly two years ago, nothing about Donald Trump has been predictable. So trying to determine what the Trump Administration might mean for employers is guesswork at best.

Still, we can probably expect his overall policies to be quite a bit different than they’ve been for the past eight years, and if he has any intention of keeping his campaign promises it wouldn’t be surprising to see him reverse certain workplace policies that the Obama Administration put into place.

One big area Trump may target is Obama-era executive orders that affect government contractors, since he may view them as hindering economic growth and job creation and it won’t take an act of Congress to undo them. [Read more…]

Be sure to protect your privacy in a divorce

If you’re like most people, you’ve probably read stories about celebrity divorces, seen their dirty laundry aired in public and maybe even breathed a sigh of relief that you’re not in that boat. But even if you’re a relative nobody, your privacy can still be compromised during a divorce, causing you both emotional and financial harm.

That’s because a divorce is a legal proceeding, and in most states court documents are a matter of public record.

So how can you protect yourself? First, many states allow you to withhold certain highly confidential pieces of information from publicly searchable court documents. This includes Social Security numbers, driver’s license numbers, your mother’s maiden name and other types of information that can be used for identity theft and fraud purposes — or to gain access to other compromising information about you that you want to keep private. It’s a great idea to talk to a family law attorney where you live to see what kind of identifying information you can protect in court papers and how to do so. [Read more…]

Grandparent rights can be complicated, recent cases show

For grandparents fighting for the right to see their grandkids, a couple of cases out of Virginia suggest that it may be easier to hold onto visitation rights that a court has already granted then to go to court and secure them in the first place.

Take the case of Ohio couple Delmar and Susan Lang. Their son died a year after he and their daughter-in-law Melanie got divorced. The Langs’ relationship with Melanie soon fell apart and she tried to keep them from seeing their four grandchildren.

The Langs went to court and a Ohio judge granted them visitation. But Melanie moved to Virginia, where she registered the Ohio order and asked a Virginia court to modify it and strip the Langs of visitation rights. [Read more…]

Too much Pokemon Go? Parents battle over screen time

Divorced parents can battle over a lot of things, including child support, bedtimes, who gets the kids for Thanksgiving or Christmas, educational philosophy, religious observances and stepparents newly arrived on the scene.

Now there’s the issue of screen time. With the increasing pervasiveness of tablets and smart phones, particularly among the younger set, it’s as common to see kids glued to their iPhones or iPads as it is to see adults. But studies show that too much screen time isn’t great for kids. It impacts their attention span and their cognitive abilities, and they can easily become addicted.

So what happens when you want your kids’ screen time limited and your ex is perfectly happy to have them become technology zombies? [Read more…]

Issues to consider before relocating after a divorce

People move for a lot of reasons. Maybe you have an awesome career opportunity in a distant city or you either want to be closer to a new romantic interest or live in an area where you’ve got better odds of finding one. Perhaps you’re a city girl who’s sick of living in the sticks or a country boy who can’t stand the hassles of urban life. Maybe you want to be near the beach or really good skiing.

But whatever your reason for relocating might be, a big move can be a lot more complicated if you’re divorced with kids. If you’re in that boat, it’s important to be aware of certain issues that can arise and talk to a family law attorney about how best to address them.

The biggest issue to consider before relocating is how the move might affect your parenting plan. If you’re like a lot of divorced couples living in the same area you very likely share parenting time. Perhaps it’s joint custody split right down the middle where the kids spend half the week with you and half the week with your ex-spouse, or maybe your ex has the kids one night a week and every other weekend. If you’re moving, say, 250 miles away, your arrangement will no longer be feasible. In that case, your relocation will require modification of your custody agreement. [Read more…]

Have adult children? Take steps to avoid medical access denial

Imagine your college-aged daughter has an accident while away at school and ends up in the emergency room. When you call the hospital, you are denied information about her care because you do not have the proper forms signed. Under the Health Insurance Portability and Accountability Act (HIPAA), you do not have legal access to your child’s health information after they reach age 18, even if your child is still your dependent and their health insurance coverage is in your name. To avoid this administrative nightmare, take the following steps.

  1. Make sure your health insurance coverage will cover your child at his or her new campus home.
  2. Have your son or daughter sign a HIPAA authorization form allowing you access to their medical information. [Read more…]

Learn from the ‘best places to work’

Google, Facebook, and Southwest Airlines are among the top five companies on job search site Indeed’s “Best Places to Work 2017” list. You may not have the resources of these large companies, but you can incorporate some of their ideas into your company’s culture.

Respect. The best companies cultivate a culture of respect, according to a poll conducted by the Society for Human Resource Management. Employees say they feel valued by their leaders and their coworkers regardless of their background, ethnicity, religion, sexual orientation, or gender.

Opportunities for growth. Leaders at the best companies evaluate staff regularly and look for ways to challenge them in new areas.

[Read more…]

Your HSA as a retirement tool – the facts

Health Savings Accounts (HSAs) are a great way to pay for medical expenses, and since unused funds roll over from year to year, the account can also provide a source of retirement funds in addition to other plans like 401(k)s or IRAs. But be aware of how HSAs compare to other retirement investment tools.

  • HSAs work best when they are used to pay for qualified medical expenses. Neither your original contributions to an HSA nor your investment earnings are taxed when used this way.
  • There is no required minimum distribution after you reach age 70½, like there is with 401(k)s and IRAs. [Read more…]

Review your condo bylaws before renting out your place on Airbnb

Renting out your condo on Airbnb might seem like a great way to make some extra money. But before you jump on the opportunity, it’s wise to check your condo association bylaws.

In most cases, you’ll find that the bylaws include restrictions on “leasing.” For example, the rules might state that no unit can be rented for less than 6 or 12 months at a time, or they might state that a unit can’t be used as a hotel.

These provisions exist because the Federal Housing Administration, which is the biggest mortgage lender nationwide, places restrictions on the number of renters a condo complex can have. Generally, the rule is that no more than 50 percent of tenants in any complex can be renters, except in particular cases where it’s 35 percent. [Read more…]

Check your bank’s real estate notices twice

When a bank goes through a merger or agrees to buy or sell mortgage loans, certain notices must be provided to borrowers before and after the transaction closes. Federal law states clearly what notices are required and how they must be worded, but sometimes the legal rules conflict with each other.

It’s helpful to have an attorney review any notices you receive to ensure that they are in compliance with federal law and evaluate how they impact the terms of your loan.

Under a federal law called the Real Estate Settlement Procedures Act of 1974 (RESPA), when a bank or loan servicer transfers the servicing of a residential mortgage loan, borrowers must be provided with written notice by both the transferor and the transferee, including: 1) the effective date; 2) the date on which the transferor will stop accepting payments and the date on which the transferee will begin to accept payments; 3) the name and address of the transferor and a collect or toll-free telephone number to call with questions about servicing; 4) an explanation of any impact on the terms and availability of related insurance coverage; and 5) a statement indicating that the transfer only affects terms directly related to the servicing of the loan. [Read more…]

Don’t let surprise costs of your home purchase shock you

If you’re buying a house, the total price you’ll end up paying is more than meets the eye.

Usually, a buyer pays between 2 percent and 5 percent of the home purchase price in closing costs. Lenders often disclose these costs, but they aren’t the only hidden fees you need to consider.

Other fees to keep in mind include payments to appraisers, home inspectors and settlement agents, as well as the cost of title insurance, homeowners’ insurance and property taxes. [Read more…]

If your house burns down, do you still have to pay your mortgage?

At the closing for your home purchase or refinancing, you are required to sign a promissory note that says you’ll make the mortgage payments every month. That agreement remains in effect even if your house burns down. You’re also required to report any loss to the lender and your insurance carrier promptly.

But a reprieve is still possible. For example, a lender might allow a borrower to suspend mortgage payments for a defined period of time or might put a hold on foreclosure activity.

Based on the standard Fannie Mae or Freddie Mac mortgage form, a borrower must repair or restore the property as long as that is financially possible, unless there is a different agreement between the parties. As a result, you can’t simply walk away after a fire. If you do, you risk defaulting on your mortgage. [Read more…]

Credit monitoring: Be aware the credit score you get might be different than lenders receive

Subscribing to a credit monitoring service to keep tabs on your credit score can be a helpful way to manage and protect your credit.

But did you know that the score you purchase isn’t always the same as the one the lender obtains from a credit reporting agency?

That comes as a surprise to many borrowers. But the real questions are why is this the case and what can you do about it? [Read more…]

Reverse mortgages increasingly available for high-value homes

Seniors with pricier homes now have an increased ability to get a bigger reverse mortgage in order to raise cash for retirement. As the housing market has improved, so-called jumbo reverse mortgages are becoming more popular even though they carry some risk.

Reverse mortgages allow homeowners who are at least 62 years of age to borrow money on their house. The homeowner receives a sum of money from the lender, based largely on the value of the house, the age of the borrower and current interest rates. The loan does not need to be paid back until the last surviving homeowner dies, sells the house or permanently moves out. Homeowners can use money from a reverse mortgage to pay for improvements to their home, to allow them to delay taking Social Security or to pay for home health care, among other things.

The most widely available reverse mortgage product is the Home Equity Conversion Mortgage (HECM), the only reverse mortgage program insured by the Federal Housing Administration (FHA). However, the FHA sets a ceiling on the amount that can be borrowed against a single-family house, which is determined on a county-by-county basis. The national limit on the amount a homeowner can borrow is $625,000.  [Read more…]

Don’t wait until it’s too late to execute a power of attorney

A durable power of attorney is an extremely important estate planning tool, often more important than a will.  If you become incapacitated due to dementia or some other reason, this crucial document allows a person you appoint (your “attorney-in-fact” or “agent”) to act in place of you (the “principal” ) for financial purposes.  The agent under the power of attorney can quickly step in and take care of your affairs.

But in order to execute a power of attorney and name an agent to stand in your shoes, you need to have capacity.  Regrettably, many people delay completing this vital estate planning step until it’s too late and they no longer are legally capable of doing it.

What happens then? Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time and costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship the representative may have to seek court permission to take planning steps that he or she could have implemented immediately under a simple durable power of attorney. [Read more…]

Life insurance can play role as part of estate plan

For young families, life insurance can be a great help in replacing lost income.  But as people get older it can also serve as part of an estate plan.

Historically, one main reason to buy life insurance as part of an estate plan was to have cash available to pay estate taxes. Now that the estate tax exemption is so big (in 2016, estates could exempt $5.45 million per individual from taxation), most estates don’t pay federal estate taxes, and President Donald Trump and his Republican allies would like to eliminate the estate tax entirely. However, life insurance can still be helpful in a number of other ways:

  • Providing immediate cash. Life insurance provides cash to use for the payment of debt, burial or estate administration fees. In addition, life insurance can be used to pay state estate taxes, if applicable. [Read more…]

The life estate: a useful tool in the right circumstances

The term “life estate” often comes up in discussions of estate and Medicaid planning. Life estates can be used to avoid probate and to give a house to children without relinquishing the ability to live in it.  They also can play an important role in Medicaid planning.  But what, exactly, does the term mean and how are life estates used?

A life estate is a form of joint ownership that allows one person to remain in a house until his or her death, when it passes to the other owner.  Two or more people each have an ownership interest in a property, but for different periods of time. The person holding the life estate — the life tenant — possesses the property during his or her life. The other owner — the “remainderman” — has a current ownership interest but cannot take possession until the death of the life estate holder. The life tenant has full control of the property during his or her lifetime and has the legal responsibility to maintain the property as well as the right to use it, rent it out and make improvements to it.

When the life tenant dies, the house will not go through probate, since at the life tenant’s ownership passes automatically to the holders of the remainder interest. Because the property is not included in the life tenant’s probate estate, it can avoid Medicaid estate recovery in states that have not expanded the definition of estate recovery to include non-probate assets. Even if the state does place a lien on the property to recoup Medicaid costs, the lien will be for the value of the life estate, not the full value of the property. [Read more…]

Are you covered by Medicare while traveling within the U.S.?

Those who have reached age 65, the typical age of Medicare eligibility, often have more time to spend traveling.  Although Medicare coverage is generally not available when beneficiaries are overseas, the news may be better for those exploring destinations closer to home.

If you have the original Medicare, the answer is simple: You can travel anywhere in the U.S. or its territories and receive health services from any doctor or hospital that accepts Medicare.  (“Territories” includes Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands.) The amount you will pay depends on whether the provider “accepts assignment.”  Providers that take assignment agree to accept the approved Medicare amount as payment in full, although in the case of outpatient visits you or your Medigap insurer may be left with a 20 percent coinsurance, as would be the case for care at home.

Providers that don’t accept assignment may charge you up to 15 percent above the Medicare-approved amount, although this percentage may be lower in some states. In the case of providers that don’t accept Medicare at all, you will have to pay the entire cost of care. [Read more…]

Five home office deduction mistakes

Here are five common mistakes of those who deduct home office expenses.

  1. Not taking it. Some believe the home office deduction is too complicated, while others believe taking the deduction increases your chance of being audited.
  2. Not exclusive or regular. The space you use must be used exclusively and regularly for your business.
    • Exclusively: Your home office cannot be used for another purpose.
    • Regularly: It should be the primary place for conducting regular business activities, such as record-keeping and ordering. [Read more…]

Three actions to save for retirement

If you haven’t started saving for retirement or you haven’t saved enough, here are three actions you can take to put you in a better position during your golden years:

  1. Contribute as much as possible every year to a 401(k) pretax retirement plan, up to the $18,000 maximum, or $24,000 if you are age 50 or older.
  2. Contribute as much as possible to a Traditional or Roth IRA every year, up to the $5,500 maximum, or $6,500 if you are age 50 or older. [Read more…]

Reap the benefits of hiring your child for the summer

Hiring your children to work in your business can be a win-win situation for everyone. Your kids will earn money, gain real-life experience in the workplace, and learn what you do every day. And you will reap a few tax benefits in the process. The following guidelines will help you determine if the arrangement will work in your situation.

  • Make sure your child works a real job that he or she can reasonably handle, no matter how basic or simple. Consider tasks like office filing, packing orders, or customer service.
  • Treat your child like any other employee. Expect regular hours and appropriate behavior. If you are lenient with your child, you risk upsetting other employees. [Read more…]