I did a closing of a Chicago condo this week. The developer offered a flat screen television to the buyer AND another one to the buyer’s agent as an incentive to buy the condo. The price limit was $1200 on the televisions. The developer reported that sales picked up nicely when the televisions were thrown in. Both client and agent were quite satisfied too.
Here are the unhappy totals for real estate sales for Cook County single-family homes for May 2007 compared to last year:
May 2007 2786 houses sold
May 2006 4690 houses sold
This is a steep drop of almost 50%. The strange thing is that it was already slowing down in May 2006. We don’t see anyone talking about "flipping" houses anymore (or even buying and rehabbing them). The only ones really busy are the foreclosure attorneys.
When a client sets up a living trust, we often record a new deed to their home transferring it to their living trust. In the past this caused no problem with the homeowner’s exemption on the real estate tax bill. Now it does cause a problem.
Background: The homeowner’s exemption is available only on your primary residence and reduces the tax bill by about $400.00. Many will remember, years ago, the infamous "postcard" that had to be completed each year and mailed back to the assessor in order to keep the exemption. A few years ago, the assessor wisely ditched the postcard. So once you had your homeowner’s exemption you were all set and didn’t have to do anything annually or otherwise to maintain the exemption. (FYI- No other county requires any actions to maintain a homeowner’s exemption–you just get it.)
Recently, the Cook Co. Assessor’s office, in an apparent sleazy, revenue grab decided to require that homeowner’s who deeded their properties to living trusts (really it applies to any title transfer, not just deeds to living trusts, including a quitclaim deed in a divorce, a deed to a land trust or just changing titleholders) need to reapply for the homeowner’s exemption, or they will lose the exemption.
This is a very strange move. They do mail a notice to the homeowner (who transferred title to the trust) to reapply. Realistically, how many will read this? I think they know that many will ignore the notice.
This is a joke and the assessor’s policy needs to be changed immediately. I have heard that some attorneys have filed suit to reverse this unwise policy.
This seems to apply to transfers made during 2006 only. If you put your house in a living trust before 2006, you have nothing to worry about. If you transferred your house to a trust in 2006 or 2007 watch for the notice from the assessor’s office. You can reapply for the exemption online. Here is the site to reapply for the homeowner’s exemption.
This web site shows how well graphs illustrate things. Here, home prices are graphed in a video ride on a rollercoaster. After looking at this graph, it’s no wonder the home market has dropped after such a run up.
Ed Slott is an author who writes about retirement plans. His primary focus is how to "stretch out" an IRA for heirs after the account owner’s death. This is a worthy topic. Far too many heirs "time bomb" an inherited IRA account (meaning they withdraw all of the money and owe income tax on it, rather than leaving it in the IRA to grow tax deferred for years in the IRA. "Your Complete Retirement Planning Roadmap" is a worthy effort and goes into detail on how to structure your IRA beneficiary designations to allow for maximum income tax deferral. It has a good section on how (and how not to) to make your trust the beneficiary of your IRA. A lot of the book consists of worksheets. I would suggest checking this one out at the library rather than buying it. It is good basic information for anyone with a large IRA account.
I read Wall St. Journal regularly even though I am hardly a titan of industry. There were two articles in WSJ recently about living trusts that drove me crazy.
On 12/31/06 there was an article titled "Living Trusts: Sometimes Needed Often Not." This was a typical "anti-trust" story that said watch out for finacial planners that pitch trusts along with annuities and other high fee products. The story goes on to say "In Texas, it’s possible to avoid probate entirely by having certain language in your will." This is 100% incorrect, of course. I went back and looked at the story online and there is a correction at the bottom of the story saying you can’t avoid probate with a will in Texas (or anywhere else!)
Today, 1/14/07, there was another WSJ story called "Smart Retirment Shopping: High Pressure TacticsTarget Seniors Savings: Avoiding the Hard Sell." In this article, which is a little better that the article mentioned above, the writer quotes an attorney who says "a competently written will can help you avoid probate too." This is 100% wrong.
Several clients asked about me whether they really needed a living trust after reading the first story. The general public has a hard time sorting out the difference between wills and trusts as it is, without slapdash articles like these.
The Facts: Wills guarantee probate. Probate is expensive. Attorneys and executors often overcharge for simple actions in probate. If the cost of a living trust is reasonable (say less than $1000.00) it makes sense to use a living trust rather than a will.