Yearly Archives: 2015

Mortgage Debt Forgiveness Act extended again in nick of time

Uncategorized

It looks like the president will sign an extension today of the Mortgage Debt Forgiveness Act through 2016. Why Congress waited again until the last minute to do this is beyond me? Last year, the same thing happened. Congress waited until the end of 2014 to extend it through 2014. How are owners of underwater properties supposed to plan ahead without knowing the law?

The result of this is that any homeowner whose primary residence was foreclosed upon or sold at a short sale in 2015 will not have to pay income tax in the forgiven debt.

E-recording in Cook County: Needs work

Living Trusts, Real Estate-Sales

I love techno advances that save time and make life easier. I am not a fan of technology that complicates things. The Cook County Recorder’s office new e-recording system for deeds and mortgages is in the second category.

In the past, recording a deed meant driving to the recorder’s office standing in line and recording the document in person.

Many states now allow e-recording, which means you can record a document online from your computer. There is a great software program called Simplifile that helps to do this. It’s a wonder , super-easy to use and makes it really easy to record deeds online.

Cook County uses Simplifile, but Cook stacks a bunch of requirements on e-recording that make it really hard, almost impossible, to record a deed electronically. My office records a lot of deeds, mostly deeds to living trusts. These are called “exempt” deeds, meaning  that no transfer tax is paid because there is no sales price paid.

To record an exempt deed, first Cook requires you to fill out a complete MyDec form for an exempt deed. This is not required if you show up at the recorder’s office to record an exempt deed. It takes about 15-20 minutes to fill out a MyDec form online. Why would I do that when I can record the exempt deed in person without filling it out?

Second, Cook County requires that you be reqistered as a title company with MyDec, which requires filling out a bunch of forms that have to be approved by the county.

So, while I can e-record deeds very easily in most counties in the country I can’t record a deed in the county where I live.

New Living Trust certification form in IL

Living Trusts

Would you want to hand out a copy of your living trust to complete strangers? No one wants to do that, but it the past, it was common to have to furnish a complete copy of your living trust if you were:

1. Opening a bank account.
2. Opening a brokerage account.
3. Selling or refinancing your home.
Now, furnishing a copy of your living trust to third parities is no longer necessary in Illinois.
A new law enacted in August 2015 allows those with living trusts to sign a trust certification instead of furnishing the entire trust to third parties like banks, brokerage houses and title companies. The trust certification form is here: Statutory_Certification_of_Trust

IL small estate affidavit updated for “negative” estates

Estate Planning, Probate

Often, a client will call to say a relative died with a lot of debt and few assets: a checking account, maybe a small savings and a boatload of debt.

We go over the situation and I explain that we can collect up to $100k of assets in a deceased’s own name without a probate using a small estate affidavit.

Good, good…they say… tell me more.  But…  I say (there’s always a but)… there is a slight problem in that someone has to sign the small estate affidavit and swear that all debts already have been paid.

Usually this means that the heir has to use his own money to pay the debts.  No one wants to front the money to pay debts, so the heirs just abandon the account and do nothing to collect it.

The small estate affidavit works well to collect straggler assets left in a deceased;s name, but not when there is a lot of debt.

The small estate affidavit in Illinois was just amended. It now provides a listing of the priority of creditors and allows the creditors to be paid directly from the funds in the deceased’s name. But whoever signs the small estate affidavit is now REALLY on the hook for any unpaid debts because they have to agree to pay back any and every creditor who is NOT paid (including attorney’s fees). This is the language in the new small estate affidavit  (read this and weep):

  “I understand that the decedent’s estate must be distributed first to satisfy claims against the decedent’s estate as set forth in paragraph 7.5 of this affidavit before any distribution is made to any heir or legatee. By signing this affidavit, I agree to indemnify and hold harmless all creditors of the decedent’s estate, the decedent’s heirs and legatees, and other persons, corporations, or financial institutions relying upon this affidavit who incur any loss because of reliance on this affidavit, up to the amount lost because of any act or omission by me. I further understand that any person, corporation, or financial institution recovering under this indemnification provision shall be entitled to reasonable attorney’s fees and the expenses of recovery.”

 So those in Illinois signing a small estate affidavit to collect assets for a “negative” estate should be extra careful because there is big time liability should the debts not be paid.

New power of attorney for health care in Illinois

Estate Planning

I’m not sure why the Illinois legislature keeps jazzing around with law issues that don’t need to be fixed. It’s not like there is a shortage of messed up things that they could be fixing with new laws.

A couple years ago they gave us the Real Estate Transfer on Death Instrument Act. I think about two people have used that brilliant law to avoid probate on their homes. I have never seen a single property with a transfer on death instrument on it.

Now, the legislature also amended the power of attorney for health care law effective January 1, 2015. The old power of attorney for health care was just fine in my humble opinion.

The new one starts out with three pages of explanation to the person signing it. It is now written so that an 8th grader could understand it. But the intro/explanation is way too long and I doubt many people are going to read much of it.

There is a big change in the section on life-sustaining treatment. The old power of attorney gave three choices for life sustaining treatment and most clients picked the first one of the three. These were the OLD choices:

  1.  I do not want my life to be prolonged nor do I want life sustaining treatment to be provided or continued if my agent believes the burdens of the treatment outweigh the expected benefits. I want my agent to consider the relief of suffering, the expense involved and the quality as well as the possible extension of my life in making decisions concerning life sustaining treatment.

  1. I want my life to be prolonged and I want life sustaining treatment to be provided or continued, unless I am, in the opinion of my attending physician, in accordance with reasonable medical standards at the time of reference, in a state of “permanent unconsciousness” or suffer from an “incurable or irreversible condition” or “terminal condition”, as those terms are defined in Section 4 4 of the Illinois Power of Attorney Act. If and when I am in any one of these states or conditions, I want life sustaining treatment to be withheld or discontinued.
  1. I want my life to be prolonged to the greatest extent possible in accordance with reasonable medical standards without regard to my condition, the chances I have for recovery or the cost of the procedures.  

Now there are only two choices on life sustaining treatment in the NEW power of attorney:

  1. The quality of my life is more important than the  length of my life. If I am unconscious and my attending physician believes, in accordance with reasonable medical standards, that I will not wake up or recover my ability to think, communicate with my family and friends, and experience my surroundings, I do not want treatments to prolong my life or delay my death, but I do want treatment or care to make me comfortable and to relieve me of pain.

  1. Staying alive is more important to me, no matter how sick I am, how much I am suffering, the cost of the    procedures, or how unlikely my chances for recovery are. I want my life to be prolonged to the greatest extent  possible in accordance with reasonable medical standards.

So my brilliant legal examination is this:  Choice 1 in the old form, selected by most clients and which said “leave it up to my agent” has been eliminated from the form. The new choice 2 has been reworded and is close to the old choice 2. Choice 3 remains the same as before for the most part.

In the new form, everyone will pick Choice 1 and no one will pick the second choice. The first choice now asks for a doctor’s opinion, but is that required or just advisory? Who knows.

I see no reason for all this wordsmithing.  There was no problem with the old poa. Thankfully, old power of attorneys do not have to be redone and are still valid. I have been offering the new one to clients and we will see how it goes.

What I learned in 14 years of website “building”

Technology, Weblogs
I built my first website in 2001. “Built” is probably a little too creative of a term. It was more like hacking through the jungle and getting stuck in a swamp, because I was trying to use Microsoft Frontpage. The damn software was next to impossible, but I bluffed my way through it and had a skeletal site with a few forms.
WordPress became big and I switched to it about 6 years ago for both my website and my blog (this site).
I was just reading that Google is going to penalize websites that are not mobile friendly this month. Here is where you check to see if your site is mobile friendly.
As luck would have it, I just upgraded my site to be mobile friendly a few weeks ago. I thought about hiring a web designer to help me this time, and I emailed three or four of them. I got exactly zero responses even to the fancy “hire us” forms on their websites.
So I decided to do it myself again. I still use WordPress, but I switched to using a theme by Elegant Themes called Divi. It is a great, drag and drop theme that is about 200% easier to use than Frontpage was.
 I really like Divi and would highly recommend it. If you are moderately tech savvy you can put together a nice looking mobile friendly site in no time. And then Google won’t treat your site as second class.

FHA 90-day seasoning requirement is back for flips

Mortgages, Real Estate-Purchases

Be careful if you are buying a property that the seller is trying to flip. WIth a flip, the seller buys a distressed or foreclosed property, fixes it up and then quickly resells it. If you are getting an FHA mortgage to buy a  property being flipped, you will not be able to sign a contract to purchase the property until 90 days after the seller has owned the property.

The 90 day time period is measured from the date the seller acquired the property (closed on the property)  to the dale the seller signs a contract with the new FHA buyer.
The purpose of this FHA “seasoning” rule is to prevent sellers from acquiring a property, doing cosmetic repairs and then reselling it at an inflated price. For the past few years, during the depressed real estate market, FHA waived this rule and allowed the buyer to sign the contract earlier than 90 days, but that changed on January 1, 2015.
But now, FHA is back to enforcing the seasoning requirement.
I have also found that many lenders will require two appraisals to be done if the buyer is buying a flipped property. This will often delay closing because the parties have to wait for the second appraisal.

Cook County adds new zoning check to home sales

Real Estate-Sales

The administrative tangle of selling a home keeps getting thicker every day.

For years, the city of Chicago required a zoning certification if you sell a home (condos are exempt) within its borders. The purpose of it is to warn the buyer of “illegal” apartments in multi-family housing. There are many illegal garden and converted attic apartments in the city and the zoning certification alerts the buyer to the correct number of units.

Now, starting March 21, 2015, homeowners in unincorporated Cook County will have to order a zoning use certificate before they sell their homes. The county is aiming to warn buyers of improper uses of land. At least 10 business days before closing (two weeks for those who are counting) the seller will have to pay $100 and submit a survey, a legal description and a statement that all work was done with building permits. The Cook County Building Commission then will  (or will not) issue a certification that the property is being used according to the zoning. Theoretically, a buyer might refuse to close if the county refused to certify that the property use was within the zoning.

A couple of problems with this:

1. It is very hard to determine whether properties are located in unincorporated Cook County in a village or a town. The new zoning requirement will be missed by many who will think the property is in a village or town, not unincorporated Cook county.

2. The fee of $100 is high and waiting two weeks for a decision is crazy.

3. Submitting the statement that no work was done without permits is kind of excessive, because a lot of work is done without permits. And a lot of work is done without permits by a prior owner, so how does the seller supposed to handle that?  There is no inspection of the property and most likely the county will look at the survey for additions made without a permit or outbuildings added without a permit.

4. The certification is good for 6 months and really should be ordered before a home goes on the market to avoid jam ups and closing delays.

So plan ahead if you are selling a house in unincorporated Cook county this spring.

(Thanks to Matt Hernacki www.misterhomes.com for pointing out this new rule.)

 

 

 

What assets do NOT go into a living trust?

Living Trusts
I spend a lot of time helping client “fund” their living trusts. My policy to to have a separate funding meeting at which we complete all of the funding forms. That means filling out many, many change of beneficiary forms. Filling these out is numbing and not real fun, but it’s necessary for the trust to work right (avoid probate).
I often brag that if I drafted a trust for a client, there has never been a probate afterward. What a claim to fame. Truth be told, there are always some assets in a person’s own name at death, but in Illinois we are lucky to be able to transfer $100,000 or less of assets to a trust after a death without opening a probate. This is done by small estate affidavit. It’s a quick, easy way to mop up assets left in a deceased’s own name and only costs about $100 to prepare. Thank Ja for the small estate affidavit .
There are some items that do not go in to a living trust:
1. IRAs. Retirement accounts are not retitled to a trust. The trust is sometimes (rarely) the beneficiary of the IRA, but the IRA is never retitled to the trust.
2. Cars. Cars do not cause a probate and can be transferred using a small estate affidavit easily. Not necessary to put a car in the trust. In fact, it’s a waste of money to do so. Same goes for mobile home titles and motorcycles.
3. Stock Options. Some lucky clients have these, but most companies will not let you retitle the account to a trust. Some have a beneficiary form, but very few.
4. Internet bank accounts. I have found that several internet banks will not let clients put their accounts in a living trust. This is crazy, but the only cure it to close to account and open it at a brick and mortar bank.
5. Cemetery Plots. These little devils are not deeded like regular real estate. The titles are just the contract with the company owning the cemetery. No need to try to put it in the trust.
6. International real estate. Many clients own real estate in the UK or India. Real estate in another country cannot go in the living trust.

2014 real estate tax exemption forms are here

Real estate tax

Forms showed up today on the Cook County Assessor’s website for the following exemptions for the 2014 tax year

1. Homeowner’s exemption: This is only needed if you bought a new house in late 2013 or 2014. You (or the former owner had to live there on 1/1/14 to qualify for this. File it once and you are done. Saves about $300 to $700 on the tax bill.

2. Senior exemption: Requires an annual application for those 65 year of age and older and saves about $400 on the tax bill

3. Senior freeze: Requires an annual application and an income of less than $55,000 and freezes the owner’s assessment level.

Be sure to file your senior and senior freeze applications now.