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. 
All posts by tfsammons
Good IRA book
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.
Wall St. Journal and Living Trusts
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.
PMI now tax deductible
If your mortgage is paid off, don’t read this item.
If you plan to buy a house, and to put down more than 20%, you can skip this item.
If you are like 50% of the population and put less than 20% down on a real estate purchase, then you want to know about this.
Private Mortgage Insurance (PMI) is now tax deductible. PMI is a insurance premium paid monthly by borrowers who put less than 20% down on a property. It does nothing for the borrower, but protects the lender if the borrower defaults.
No one wants to pay PMI so "piggyback" mortgages developed. These avoid PMI because the first mortgage is usually 80% of the purchase price and there is a second mortgage (at a higher rate) for the extra 10 or 20%. The interest paid on both mortgage is deductible. PMI virtually disappeared from real estate closing for the last few years.
Now it may be worth at least considering. Rules: If your income is less than $110,000.00 and if you itemize deductions, you can deduct PMI premiums effective 1/1/07.
Now, more than ever, you need a competent mortgage broker to evaluate the options for you.
(I don’t know why Congress always does this, but the law expires at the end of 2007.)
Update: President Bush signed this on 12/20/06 See story.
Snowbird Guide-all about making FL your "home"
Many clients have condos in Florida, but their primary residence is here in the northwest suburbs of Chicago. Of that group, some choose to become Florida residents and change their "domicile" to Florida.
New York attorney Allan Lipman has put together a nice on-line audio seminar that explains many of the issues that surround making Florida your residence. While he mainly covers New Yorkers with condos in Florida, the concept is the same for Illinois residents. Give it a listen if you are considering making Florida your tax and voting "home."
Real Estate Blues
The real estate market has been slowing down since the fall of 2005. It seems to me that it’s way more than a slowdown. Business writer Scott Burns, whose column I enjoy, writes that many sellers are becoming "condo slaves," meaning they are stuck with real estate worth less than they paid for it initially.
In Palatine, the market for high end homes is almost nonexistent. There are 62 houses on the market between $600k and $800k and most of them are newly built houses put up after tearing down an older house. Only 2 of these 62 houses have contracts on them. That’s pretty bad. In the $250k to $450k range it’s a little better. About 17 out of 100 homes currently on the market have sold.
I have many clients that have had homes on the market for more than 6 months and cannot sell. It’s more important that ever to buy with a contingency on the sale of your current home. No one wants to be left with 2 houses for a year or more.
What can't go in a living trust? Treasury Direct
Treasury Direct allows owners of treasury bills, bonds and savings bonds to hold everything in an on-line account without the hassle of the paper bonds or bills. The only problem is that accounts titled in the name of a living trust are not allowed, only individual accounts.
I often have clients with lots (thousands and thousands of dollars) of savings bonds. The only way to get the bonds into their living trust is to use for pdf 1851 to transfer the bonds to the living trust. All the bonds must be sent to the treasury main office and then the paper bonds are re-registered in the name of the trust. This is kind of an unnecessary hassle in this electronic age.
I would not suggest leaving more than $100,000.00 in a Treasury Direct account because it will cause a probate upon the account owner’s death. It really would be nice if they allowed living trusts to own these accounts.
Screencast on Wills vs. Living Trusts
Click the icon below to view a 10 minute screencast on the differences between wills and living trusts (from the safety of your computer).
The Illinois Deed Providers Controversy
I get several calls each month from clients saying they got a mailing from Illinois Deed Providers. The client asks: should I buy a copy of my deed for $79 from them? Illinois deed providers obtains a copy of the deed to your property from the county recorder’s office for you. It costs between $2 and $15 to get a copy of the deed, but they charge $79.
It is beneficial to have a copy of the deed, but not for $79. Channel Two News recently did a story on Illinois Deed Providers that said the service was not illegal, which is right, but that it’s misleading. Other bloggers have written about the service too.
Facts on deeds:
1. You get a copy of your deed at closing.
2. It does not mean that you don’t own your house if you don’t have the deed.
3. You can get a copy of Cook Co. deed from 1986 forward at ccrd.info.
4. You can buy a copy at the other county recorders’ offices for the cost stated above.
Giving $ from IRA directly to Charity
This summer, a new law was passed that allows those over 70.5 years old to give up to $100,000.00 directly from their IRA account to charity. This is called a "charitable rollover."
Here’s a quick breakdown of what you need to know about this:
1. It only applies to those over age 70.5.
2. It only applies to IRA accounts (not a 401k, 403b, SEP, profit sharing or pensions). If your money is in one of those type of accounts you can roll over your funds to an IRA, then donate.
3. DO: Donations must go straight to the charity (not to a donor advised fund or foundation). DON’T: You cannot get a check from your IRA then give it to the charity.
4. The donated funds can’t be deducted as a charitable donation on the giver’s tax return. However, the money given to the charity from the IRA is not included as income.
Charities are very happy with this new provision and it can be a great way to reduce your estate and benefit your favorite charity. For more detail.