Legal Articles

Steer clear of non-lawyers offering Medicaid planning services

As the U.S. population ages, more non-lawyers are starting businesses that offer Medicaid planning services to seniors. While using one of these services may be cheaper than hiring a lawyer, the ultimate costs may be far greater.

If you use a non-lawyer to do Medicaid planning, they may not have any legal knowledge or training. Bad advice can lead seniors to purchase products or take actions that won’t help them qualify for Medicaid and may actually make it more difficult. The consequences of taking bad advice can include the denial of benefits, a Medicaid penalty period or a tax liability.

As a result of problems that have arisen from non-lawyers offering Medicaid planning services, a few states (Florida, Ohio, New Jersey and Tennessee) have issued regulations or guidelines providing that Medicaid planning by non-lawyers will be considered the unauthorized practice of law. [Read more…]

Rule requiring retirement advisers to put their client’s interests ahead of their own is delayed

President Donald Trump has signed an executive order calling for a review of the so-called fiduciary rule, which was intended to prevent financial advisers from steering their clients to bad retirement investments by requiring these advisers to act in the best interests of their clients. The order delays the rule, which was scheduled to go into effect in April 2017, and the rule may ultimately be repealed.

Prompted by concern that many financial advisers have a sales incentive to recommend retirement investments with high fees and low returns to their clients because the advisers get higher commissions or other incentives, the Department of Labor drew up rules in April 2016 that would require advisers to act like fiduciaries.

The rule required all financial professionals who offer advice related to retirement savings to provide recommendations that are in a client’s best interest. Currently, financial advisers only have to recommend suitable investments, which means they can push products that may benefit them more than their clients. The rule would require advisers to not accept compensation or payments that would create a conflict unless they have an enforceable contract agreeing to put the client’s interest first. Advisers also would have to disclose any conflicts and charge reasonable compensation. [Read more…]

What is undue influence, and how can it be avoided?

Saying that there has been “undue influence” is often used as a reason to contest a will or estate plan, but what does the term mean?

Undue influence occurs when someone exerts pressure on an individual, causing that individual to act contrary to his or her wishes to the benefit of the influencer or the influencer’s friends. The pressure can take the form of deception, harassment, threats or isolation. Often the influencer separates the individual from loved ones in order to coerce him or her. The elderly and infirm are usually more susceptible to undue influence.

To prove a loved one was subject to undue influence in drafting an estate plan, you have to show that the loved one disposed of his or her property in a way that was unexpected under the circumstances, that he or she is susceptible to undue influence (because of illness, age, frailty or a special relationship with the influencer), and that the person who exerted the influence had the opportunity to do so. Generally, the burden of proving undue influence is on the person asserting that it took place. However, if the alleged influencer had a “fiduciary relationship” with the loved one (meaning that the loved one placed a high degree of trust in the influencer to handle his or her affairs), the burden may be on the influencer to prove that there was no undue influence. People who have a fiduciary relationship can include a child, a spouse or an agent under a power of attorney. [Read more…]

Understanding the tax consequences of inheriting a Roth IRA

Passing down a Roth IRA can seem like a good idea, but it doesn’t always make the most sense. Before converting a traditional IRA into a Roth IRA to benefit your heirs, you should consider the tax consequences.

Earnings in a traditional IRA generally are not taxed until they are distributed to you. At age 70 1/2 you have to start taking distributions from a traditional IRA. By contrast, contributions to a Roth IRA are taxed, but the distributions are tax-free. You also do not have to take distributions from a Roth IRA.

Leaving your heirs a tax-free Roth IRA can be used as part of an estate plan. However, in figuring out the best type of IRA to leave to your beneficiaries, you need to consider whether your beneficiary’s tax rate will be higher or lower than your tax rate when you fund the IRA. In general, if your beneficiary’s tax rate is higher than your tax rate, then you should leave your beneficiary a Roth IRA. Because the funds in a Roth IRA are taxed before they are put into the IRA, it makes sense to fund it when your tax rate is lower. On the other hand, if your beneficiary’s tax rate is lower than your tax rate, a traditional IRA might make more sense. That way, you won’t pay the taxes at your higher rate. Instead, your beneficiary will pay at the lower tax rate. [Read more…]

Medicaid’s benefits for assisted living facility residents

Assisted living facilities are a housing option for people who can still live independently but who need some help.  Costs for these facilities can range from $2,000 to more than $6,000 a month, depending on location.  Medicare won’t pay for this type of care, but Medicaid might.  Almost all state Medicaid programs will cover at least some assisted living costs for eligible residents.

Unlike with nursing home stays, there is no requirement that Medicaid pay for assisted living, and no state Medicaid program can pay directly for a Medicaid recipient’s room and board in an assisted living facility. But with assisted living costs roughly half those of a semi-private nursing home room, state officials understand that they can save money by offering financial assistance to elderly individuals who are trying to stay out of nursing homes. [Read more…]

How to pass your home to your children tax-free

Giving your house to your child or children can have tax consequences, but there are ways to accomplish this tax-free. The best method to use will depend on your individual circumstances and needs.

Leave the house in your will

The simplest way to give your house to your children is to leave it to them in your will. In 2017, as long as the total amount of your estate is under $5.49 million it will not pay estate taxes. In addition, when your children inherit property it reduces the amount of capital gains taxes they will have to pay if they sell the property. Capital gains taxes are paid on the difference between the “basis” in property and its selling price. If children inherit property, the property’s tax basis is “stepped up,” which means the basis would be the value of the property at the time of death, not the original cost of the property.

There are some downsides to this approach. Some states have smaller estate tax exemptions than the federal exemption, meaning that leaving the property in your estate may cause it to owe state taxes. Also, if you were to need Medicaid at any time before you died, a lien might be put on the property and it might need to be sold after your death to repay Medicaid. [Read more…]

IRS: Account transcripts can serve as estate tax closing letter

A recent IRS notice confirms that an account transcript issued by the IRS qualifies as a substitute for an estate tax closing letter, as long as the transcript includes the proper transaction code.

An estate tax closing letter indicates that the IRS has accepted an estate tax return and that the estate’s federal tax liabilities have been satisfied. Once the letter has been received, it makes it clear to the executor of the estate that it can proceed with finalizing the estate administration process.

The receipt of the closing letter is often needed to meet requirements for state law probate proceedings. It’s rare for the IRS to reopen an estate tax return after a closing letter has been issued, except in certain extreme circumstances such as fraud or a major error by the IRS. [Read more…]

Retirement accounts: Tips for taxpayers turning 70 1/2

It’s a big year for the first set of baby boomers: They’re turning 70 1/2. And that means getting prepared for their first mandatory distributions from tax-sheltered retirement accounts.

The first thing to keep in mind is that the amount of your required annual withdrawal is based on the assets in the account as of the prior December 31. For a taxpayer with multiple 401(k) plans, he or she must take a proportional distribution from each of the accounts. If a taxpayer has multiple IRAs, the payouts can be uneven. That is, the entire amount can be taken out of one IRA, if the taxpayer chooses. [Read more…]

New law allows individuals to create special needs trusts

Buried in a new federal law is a tiny change that will now allow individuals to set up their own special needs trusts.

The sum total of the change is two words — “the individual” — intended to correct a more than 20-year-old error. The change is called the Special Needs Trust Fairness Act.

Authorized under the Omnibus Budget Reconciliation Act of 1993, special needs trusts protect assets and allow an individual to maintain eligibility for governmental benefits such as Supplemental Security Income (SSI) and Medicaid.   [Read more…]

In will contest, no need to oversell decedent’s capacity

Imagine a situation where a loved one dies and there is a contest over the validity of the will. The question arises: What was the decedent’s mental state in drafting the will?

A typical, knee jerk answer is that the decedent had a perfectly clear state of mind.

However, testamentary capacity doesn’t require such a high level of clarity in communication and comprehension. Further, overstating a decedent’s capacity might actually lead a trier of fact to become skeptical of the will proponent, especially if other evidence exists that the decedent’s mind wasn’t as clear as stated. [Read more…]

Changes proposed by Trump could open up big estate planning opportunities

With proposals to repeal the federal estate tax and the generation-skipping transfer (GST) tax on the table, the new administration may be opening up some rare estate planning options.

Under President Donald Trump’s proposal, the current step-up in basis for income tax purposes on assets owned at death would be limited to $10 million of assets. The intention, according to the proposal, is to exempt small businesses and family farms.

It’s likely that assets exceeding $10 million in value would be either subject to carryover basis rules of some kind or would be subject to capital gains tax at death. Under Trump’s proposal, the current capital gains tax rate of 20 percent would be retained. [Read more…]

2013 unclaimed tax refunds

The IRS announced that an estimated one million taxpayers who did not file an income tax return in 2013 could claim their share of $1 billion in unclaimed refunds for the 2013 tax year. The law gives most taxpayers a three-year time period to claim a tax refund. After that time, the money belongs to the U.S. Treasury. So if you did not file in 2013, to be safe, send your 2013 tax return via certified mail to arrive at the IRS by April 18.

Springtime remodeling – know the tax impacts

Spring fever often influences homeowners to update and remodel. Maybe you’re considering a new project, too. You may need to replace your deck or remodel your kitchen. If you have a remodeling project coming up, you should understand the tax consequences.

If your project qualifies as an improvement to your home, you’ll enjoy some tax benefits. But if the project is a repair, there’s generally no tax benefit. Unfortunately, it’s not always easy to tell the difference.

An improvement is defined by the IRS as something that adds value to your home or extends its life. Putting in a new kitchen, building an extension or adding a new deck are considered improvements because they add value. Replacing the roof is an improvement because it extends the life of your home. [Read more…]

IRS interest rates remain the same for second quarter 2017

Interest rates charged by the IRS on underpaid taxes and applied by the IRS on tax overpayments will remain the same for the second quarter of 2017 (April 1 through June 30). Therefore, the rates will be as follows for individuals and corporations:

For individuals:

  • 4% charged on underpayments; 4% paid on overpayments.

[Read more…]

Apply for an extension if you can’t file by April 18

Tax time can be stressful, but don’t panic if you can’t file your tax return on time. There’s still time to get an automatic six-month deadline extension.

There are four ways to obtain an extension:

  1. File a paper copy of Form 4868 with the IRS and enclose your payment of estimated tax due.
  2. File for an extension electronically using the IRS e-file system on your computer.
  3. Using Direct Pay, the Electronic Federal Tax Payment System, pay all or part of your estimated income tax due and indicate that the payment is for an extension.
  4. Have your tax preparer e-file for an extension on your behalf.

[Read more…]

What’s due on April 18?

Tuesday, April 18, is a major tax deadline. Here are some of the tax filing and related deadlines:

  • 2016 individual income tax returns.
  • Calendar-year 2016 C corporation income tax returns.
  • 2016 annual gift tax returns.
  • 2016 IRA contributions.
  • 2017 individual estimated tax first quarter installment.
  • 2013 individual tax return amendments unless the 2013 return had a filing extension.

‘No vacancy’ is no defense in promotion lawsuit

Can an employer be sued for not promoting someone, even if there’s no vacancy in the job to which she wants to be promoted?

Maybe, according to a federal appeals court in Washington, D.C.

Janean Chambers was a blind black woman who worked for the Department of Health and Human Services. She was at a GS-9 pay grade and wanted to be promoted to a GS-11 job. [Read more…]

Yoga teacher could be fired for being ‘too cute’

A Manhattan yoga teacher who claimed her female boss fired her because the boss’s husband thought she was attractive can’t bring a lawsuit for unjust termination, a judge has ruled.

Dilek Edwards worked as a yoga instructor and massage therapist at a chiropractic clinic owned by Stephanie Adams – a former Playboy model – and her husband, Charles Nicolai.

Edwards apparently had given Nicolai some massages, and Nicolai praised her work and told her that his wife might become jealous because she was “too cute.” [Read more…]

New rules for company ‘wellness’ programs

Corporate wellness programs – designed to help workers quit smoking, manage stress, lose weight and address other health issues – are becoming popular with employers. Many businesses see them as a valuable perk as well as a way to reduce absenteeism and health care costs.

However, under federal law, these programs must be voluntary – employees can’t be forced to participate in them. Further, there are limits on how companies can obtain and use medical and genetic information about workers and their families.

The federal Equal Employment Opportunity Commission has issued new rules that clarify what’s allowed. [Read more…]

Workers’ ‘right to gripe’ gets another boost

The National Labor Relations Board is cracking down on workplace rules that are designed to promote harmony and civility, but that restrict employees from complaining about their working conditions.

All employees (even those who don’t belong to a union) have a right under federal labor law to talk to each other about their pay and conditions and to agitate for improvements. Here are some examples of workplace rules that the NLRB thinks might violate that right: [Read more…]

Should companies buy wage-and-hour insurance?

Wage-and-hour lawsuits under the Fair Labor Standards Act have increased by 30 percent in just the last five years, and with the huge changes that took place on December 1, that number is expected to increase even further.

Some companies are buying specific insurance policies to protect them against these claims.

If a business already has an employment practices liability insurance (EPLI) policy, this might not be necessary because these claims may already be covered. However, many EPLI policies specifically exclude coverage for wage-and-hour violations. Other general liability policies might in theory cover wage-and-hour suits, but these insurers are often very aggressive in contesting their obligation to cover such claims after they arise.

Businesses that are concerned might want to review their policies with an employment attorney.

What the new overtime rules will mean for businesses and employees

Major changes to the federal overtime rules went into effect on December 1, and this could mean big changes in the workplace.

Some 4.2 million employees who aren’t eligible for overtime now will become eligible under the new rules. This could prompt many businesses to reduce overtime hours, hire new workers, raise or lower salaries, convert salaried employees to hourly employees, and adjust bonuses and commissions. It could also mean changes for workers who telecommute or have flexible schedules.

In general, employees must be paid time-and-a-half if they work more than 40 hours in a week, unless the employee is “exempt.” Currently, employees are “exempt” if they earn at least $23,660 per year; are paid on a salary basis; and perform managerial, professional, or administrative tasks. Employees who do not have managerial, professional, or administrative jobs are exempt if they earn more than $100,000. [Read more…]

Drug testing policies may need to be revised

If you have a policy that requires drug testing after a workplace accident or injury, you may need to change it as a result of new rules issued by OSHA.

The new rules generally require that companies have a reporting procedure in place for work-related injuries and illnesses, and prohibit them from discouraging workers from reporting injuries. The catch is that, according to OSHA, a policy that requires drug testing after a workplace accident could discourage workers from reporting accidents in the first place.

To be clear, OSHA is not saying that you can never give a drug test after a mishap. But to justify a test, two things must be true: [Read more…]

What happens to unused ‘flexible spending’ funds?

Many companies have flexible spending accounts that allow employees to pay health care and dependent care expenses with pre-tax dollars. The biggest drawback to these accounts is that they’re “use it or lose it” – so if employees put money into an FSA and don’t spend all of it on qualified expenses during that calendar year, they forfeit the remainder.

So what happens to the money they forfeit?

The short answer is that the business can simply keep it. However, if a business wants to ease the burden on employees and make the FSA a more attractive benefit, there are several other options allowed under the tax laws: [Read more…]

Many computer ‘hacks’ are actually low-tech thefts

All businesses are scared these days of having their data stolen by highly sophisticated foreign computer experts – and yet a surprisingly large number of “hacks” are actually very low-tech affairs, carried out by people with minimal computer skills. The good news is that some simple measures can reduce the risk.

According to a study by the Ponemon Institute, the vast majority of CEOs view sophisticated intentional hacking as the biggest data security problem they face. The vast majority of IT managers, on the other hand, see the biggest threat as careless employees who haven’t received basic security training about phishing, passwords, cloud access, and the like.

To take one example, you might have heard that a St. Louis Cardinals baseball team employee was recently sentenced to jail for hacking into the computer secrets of a rival team, the Houston Astros. But you might not know exactly how he did it.

[Read more…]

Federal penalties are increasing dramatically

The maximum penalties that can be imposed on businesses by federal agencies are being dramatically increased, as a result of a new law passed by Congress.

OSHA’s civil penalties hadn’t increased since 1990, but that changed on August 1, 2016, when they jumped roughly 80%. The top penalty for a serious OSHA violation went from $7,000 to $12,471, and the top penalty for a willful or repeated violation went from $70,000 to $124,709.

What’s more, if an employer was inspected before August 1, but OSHA didn’t issue a citation until after August 1, OSHA can issue a penalty at the new higher rate. Since OSHA has six months from the date of a violation to issue a citation, it’s expected that a lot of companies that were inspected in the first part of 2016 will see large penalties assessed after August 1. [Read more…]

New law protects trade secrets

President Obama has signed a new federal law that expands the ability of companies to sue when someone steals or misuses a trade secret.

The law also contains new requirements for employment contracts that refer to trade secrets – which means that many such agreements should now be revised.

The “Defend Trade Secrets Act,” or DTSA, will change the legal landscape by making misuse of trade secrets a federal issue, comparable to patent, trademark and copyright infringement.

[Read more…]

Current tax law requires health insurance

During his first week in office, President Trump signed an executive order asking federal agencies to reduce the economic burden the Patient Protection and Affordable Care Act (ACA) puts on American citizens.

Unfortunately, this executive order is causing confusion. Many people are left wondering if fines will no longer be imposed or rules no longer need to be followed. Until the agencies impacted by this executive order publish their intent, act as though current laws are still in play. This includes: [Read more…]

More credits require questions

Common errors have helped to make the Earned Income Tax Credit (EIC) a major source of what the IRS calls “improper payments.” The agency estimates that of the $66 billion in EIC funds paid in 2015, nearly a quarter were collected by filers who didn’t qualify to receive them. To help combat this problem, the IRS now requires additional confirmation of information regarding the EIC and three new credits beginning in 2016.

Now if you claim the EIC, the Child Tax Credit (CTC), the Additional Child Tax Credit (ACTC), or the American Opportunity Tax Credit (AOTC), additional information may be requested of you.

For the CTC and ACTC, you may be asked how long your children lived with you over the past year, or whether they lived with an ex-spouse, relatives, or other guardian.

[Read more…]

2016 proof of health insurance: the Form 1095 wrinkle

Under the current Affordable Care Act (ACA), all Americans must have health insurance. If you receive your health insurance through the ACA marketplace or from your employer, you will receive a Form 1095. This form is used as documentation that you have adequate insurance and is used for other ACA reporting and potential tax benefits.

What’s happening now

Prior to filing your tax return you should receive your Form 1095 and review it for accuracy. If you receive your health insurance through a state or federal marketplace you will receive Form 1095-A. Otherwise your version of the form will be either Form 1095-B or Form 1095-C. Unfortunately, some providers of the “B and C” versions of Form 1095 are still having trouble issuing the forms on time. Because of this, the IRS has issued a notice backing off on this “receive the form before you file” requirement. While you will still need to prove you have adequate health insurance, the suppliers of the Form 1095-B and Form 1095-C were given until as late as March 2 to get the form out to you.

[Read more…]

Reminder: Partnership tax returns due one month earlier

Remember, partnership tax returns are now due on March 15. This is a month earlier than last year. The change is important to note, as filing the tax return late could result in unexpected penalties. The new due date now aligns filing Form 1065 with other flow-through entities like S corporation Form 1120S. If you get caught by surprise with this earlier filing date, contact us immediately.

Major tax deadlines for March

March 2

  • Large employers and others must furnish Form 1095-B or Form 1095-C to employees.

March 15

  • 2016 calendar-year S corporation Form 1120S income tax returns are due.
  • 2016 calendar-year partnerships Form 1065 income tax returns are due.

March 31

  • Forms 1095-B and 1095-C due to the IRS, if filing electronically. Employers who have 250 or more employees are required to file electronically.

Moving out? Record your home on your smartphone

If you’re getting divorced and you’ll be moving out while your spouse stays in the house, it’s a good idea to use your smartphone to make a video record of the home at the time you left it.

For one thing, you might not be able to take everything that’s important to you with you at the time you move, especially if you’re going to a smaller place. And once you move out, you’ll have little control over the home’s maintenance and upkeep.

As a result, whether accidentally or on purpose, your spouse might throw out, destroy or sell belongings of yours that have significant monetary or sentimental value. Your spouse might also let the house fall into disrepair, or there might be some damage to the home, which could lower its value. [Read more…]

You’re splitting up – who keeps the engagement ring?

So it wasn’t “until death do us part” after all, but there’s still that dazzling engagement ring. He wants it back; she wants to keep it. Who wins?

As with many things in the law, it depends on the facts, and it also depends on the state.

In some states, such as California, accepting an engagement ring is usually viewed as a promise to marry someone. Once a woman has said “I do,” the promise has been fulfilled and it’s hers to keep, even if the couple later get divorced.

[Read more…]

Live-in partner is awarded partial custody of child

A mother’s live-in romantic partner who developed a strong relationship with her child can get partial custody of the child after their breakup, a Pennsylvania court recently decided.

The mother gave birth to the child in 2007 and quickly separated from the child’s father. She then began a relationship with a woman known as C.B.

C.B. became very involved in the child’s life, participating in his medical appointments, helping select his schools, and communicating with his teachers and doc- tors. The child also had a close relationship with C.B.’s extended family, referring to her father as “Pappy” and her siblings as “aunt” and “uncle.” C.B.’s family members babysat the child, and C.B.’s mother was the child’s emergency contact. [Read more…]

‘Buy-sell’ agreements should be reviewed by a family lawyer

It’s very common for small businesses to have “buy-sell” agreements. These say that if one owner leaves, dies, or gets divorced, the other owners can buy out that owner’s interest. The purpose is to make sure that if something happens to one owner, the other owners can continue to operate the  business without having an ex- spouse, child, or stranger as an unwanted partner.

If you have such an agreement or are thinking of signing one, it’s a very good idea to have it reviewed by a family law attorney. This is true if any of the owners might someday get divorced, even if you personally are unlikely to get divorced or aren’t even married.

Here’s why: Buy-sell agreements typically set a price at which the other owners can buy the owner’s shares, or a method for determining the price, such as book value, a multiple of current annual profits, an independent appraiser’s estimate, or a board valuation made in good faith.

[Read more…]

Modern love clouds end of alimony

Many divorce agreements say that a spouse can stop paying alimony if the other spouse remarries or begins living with a romantic partner. That sounds simple – but in today’s world, romantic relationships can be anything but simple. Sometimes, as on Facebook, the best way to describe a new relationship is “it’s complicated” and whether a spouse can stop paying alimony can be complicated, too.

Here are some examples:

* Steven and Lorraine Robitzski divorced in 2004, and Steven was ordered to pay Lorraine $2,500 a month in alimony, unless she cohabited with someone. Lorraine found a new boyfriend, and Steven went to court claiming that they were living together.

According to Steven, Lorraine and her new beau spent about 100 nights a year together, they held themselves out as a couple at family and social activities and on Facebook, and the couple’s children referred to the boyfriend as “Pap Thom.”

[Read more…]

A NH Real Estate Transfer Tax Primer

The following article by Attorney David Beliveau was published by the New Hampshire Bar Association.

Tax Law: Amended Last Year: A NH Real Estate Transfer Tax Primer

By:

The New Hampshire real estate transfer tax (NH RSA 78-B) – a tax on the transfer of New Hampshire real estate – is $0.75 per $100 of the full price of or consideration for the real estate for the purchaser and the seller (meaning half of the total tax is paid by the purchaser and half by the seller).

The tax, collected by the NH Department of Revenue Administration (DRA), requires filing DRA forms PA-34, Inventory of Property Transfer; CD-57-P, Declaration of Consideration Real Estate Purchaser (Grantee); and CD-57-S, Declaration of Consideration Real Estate Seller (Grantor). The law changed last year in the case of real estate transfers to revocable trusts and LLCs. [Read more…]

Package delivery is a headache for landlords, condos

The explosion of online shopping has created a big headache for landlords and condo associations – what should be done about the deluge of packages being delivered to residents?

Staff at large apartment buildings often strain under the effort to accept, sort and deliver hundreds of packages. Smaller landlords and condo associations are striving to figure out the best policy: Should packages be left outside, where they are vulnerable to weather and theft? Is there a better, workable way to get them to tenants and unit owners?

Camden Property Trust, a huge landlord with 59,000 apartment units in 10 states, recently announced that it was banning package deliveries altogether. Camden tenants must now pick up packages at a post office, or else have them shipped to their workplace or to the home of a friend or relative. [Read more…]

If you own real estate, you need a will

Anyone who owns real estate needs to have a will that indicates what should happen to the property if he or she suddenly passes away.

You might assume you know who would inherit the house, but without a written will, the inheritance would be decided by state-law rules that might not be exactly what you’d expect.

Even if the house ultimately goes to the person you want, the lack of a will might mean that ownership of the house remains in legal limbo for an extended period of time. This can create unnecessary complications when it comes to paying property taxes and arranging for continued utilities and insurance coverage. If you have a mortgage, it can create even bigger headaches. [Read more…]

Buyer sues although property was purchased ‘as is’

A buyer who discovered that her new house was contaminated with mold can sue the seller, even though the house was purchased “as is” and the seller specifically said there might be mold in it, according to the Wisconsin Court of Appeals.

Catherine Fricano bought the house from a bank that had acquired it in a foreclosure. The house had sustained serious water damage, and before selling it, the bank twice paid for mold remediation and repair work.

The bank’s contract with Fricano said that the house was being sold “as is,” that it might have had mold in it in the past, that it might currently have mold in it, and that the bank made no guarantees whatsoever about the condition of the building. The bank also said that since it had acquired the home through foreclosure, it had “little or no direct knowledge about the condition of the property.” [Read more…]

Tax break for selling land next to your house

You probably know that if you make a profit when you sell your house, you can usually avoid paying capital gains tax. In most cases, you can avoid the tax on profits of up to $250,000 (or $500,000 for a married couple).

But did you know that if you sell your house in one transaction and a vacant parcel of land next to your house in a separate transaction, you can also get a tax break?

In many cases, you can combine the two sales and treat them as a single sale subject to the $250,000 or $500,000 exclusion.

That’s true if you sell the adjacent parcel within two years before or after you sell your house, and if the parcel was originally part of your residence and wasn’t used for a separate business or rental purpose.

Beware of this ‘trap’ in commercial insurance

Many commercial insurance policies contain what’s called a “protective safeguards endorsement.” This gives the property owner a break on its insurance premiums if the owner protects the property through a fire alarm, automatic sprinkler system, fire safety service contract, or other method of preventing harm.

Sounds like a good idea, right? It can be … but the trick is that these endorsements typically say that the owner must maintain the system in good working order at all times, or notify the insurance company right away if there’s a problem the owner can’t control. Otherwise, the insurance company won’t pay for any losses.

That means the owner must be extremely careful about maintaining its systems. Also, the owner must be extremely careful about not letting a tenant do anything to compromise the systems. If a tenant is allowed to make minor alterations without the owner’s approval, for instance, how will the owner know if the tenant does something that unintentionally affects a sprinkler system?

These endorsements can be a money-saver, but property owners need to think long and hard about the potential negative consequences.

More parents buy condos for their children in college

A growing trend is for parents to buy a condo for their college-age children to live in, instead of a dormitory. This gives the child more luxurious accommodations (and encourages an environment conducive to studying instead of all-night partying), while creating the possibility that the parents can sell the property at a profit in four years.

There are other financial benefits, too. For instance, suppose that instead of paying the college for room and board, you give the money to your child. You can give your child up to $14,000 a year without paying gift tax, and a married couple can give up to $28,000. Your child can then use the money to pay you rent for the condo. Voilà! You’ve created a rental business that provides tax breaks.

As long as you’re charging your child full market rent, you can deduct your mortgage interest payments as a business expense. You can also deduct other operating expenses, such as insurance, utilities, condo fees, cleaning costs, maintenance and repairs. You may also be able to take a deduction for depreciation. [Read more…]

How to understand your APR

Many mortgage shoppers are confused about the difference between a loan’s interest rate and its APR, or annual percentage rate. Understanding APR can be extremely valuable, because it can allow you to compare different loans more effectively and figure out which one is truly best for you.

But you’ll also want to understand the limits of APR, and why a loan with a better APR might not necessarily be a better loan given your specific circumstances.

Interest rates are simple – they’re the cost of borrowing money. All other things being equal, a loan with a 4% interest rate is better than a loan with a 5% interest rate.

But the problem with mortgages is that all other things are seldom equal, because different lenders charge different amounts for closing costs and other expenses. That’s where APR comes in. APR is designed to compare the true cost of a loan when these other expenses are taken into account. [Read more…]

Can bartering be an effective business strategy?

Have you ever thought about bartering as a way to get the goods and services you need for your business? A growing number of businesses are finding ways to use the bartering system as a means to avoid using up their company’s cash.

A simple bartering arrangement involves two parties trading items of similar value. For example, let’s say your business owns a building located next to a telephone company. An internet service provider might be interested in storing its services in an unused portion of your basement. Instead of paying rent, they offer to provide you with a high-speed internet connection and website. [Read more…]

Making the most of your tax refund

If you are expecting a tax refund, you might consider investing your refund or using it to increase your financial security. While everyone’s needs are different, here are some optional uses of your refund that may work for you. [Read more…]

Time to plan for inflation-adjusted 2017 tax numbers

Each year, certain tax figures are adjusted for inflation. While most figures are unchanged versus 2016, there is more than a 7% increase to the maximum earnings subject to social security tax. Take note of these numbers to use in your 2017 planning. [Read more…]

Mark your calendar: Tax deadlines

February 28

  • Payers must file information returns (except certain Forms 1099-MISC with non-employee compensation payments in box 7, which are due before February 1) with the IRS. (Except for certain Forms 1099-MISC outlined earlier, the deadline is March 31 if filing electronically.)
  • Forms 1095-B and 1095-C due to the IRS, if filing on paper.

March 1

  • Farmers and fishermen who did not make 2016 estimated tax payments must file 2016 tax returns and pay taxes in full.

March 2

  • Large employers must furnish Form 1095-B and Form 1095-C to employees.

March 15

  • 2016 calendar-year S corporation Form 1120S income tax returns are due.
  • 2016 calendar-year partnerships Form 1065 income tax returns are due.

March 31

  • Forms 1095-B and 1095-C due to the IRS, if filing electronically. (Employers who have 250 or more employees are required to file electronically.)

Should you buy an annuity doubler for long-term care?

“Annuity doublers” are being touted as a new alternative to long-term care insurance. But are they a good idea?

Long-term care plans have become much more expensive lately, pricing many older people out of the market. As an alternative, some companies are offering annuities that have a “nursing home doubler.” With this option, the amount of monthly annuity income you would normally receive is doubled during any period you’re in a nursing home, which will help pay for care.

The term “doubler” can be misleading. Some policies only pay 50% extra – although others pay triple. In most cases the extra income lasts for up to five years, or until the annuity’s cash value is exhausted. [Read more…]