Yearly Archives: 2004

Where's My Homeowner's Exemption Packet?

Real Estate-Purchases, Real Estate-Sales

Cook County (unlike every other county) insists on requiring homeowners to apply every year for the homeowner’s exemption on their real estate taxes. This reduces the real estate taxes by about $450.00. For years, the assessor mailed a postcard around February and had to be signed and returned. Then, just to further confuse everyone, they switched to a large 8.5 x 11 packet a few years ago.

The exemption packets have NOT been mailed yet (for the 2003 tax year) as of 4/16/04. According to the Palatine Township Assessor they should be mailed by May 1, 2004. The assessor’s website has a helpful apply online feature, but it doesn’t work until the packets are mailed.

So hang in there a few more weeks and then either download the form from the assessor’s website or fill out the form online. You have not missed the almighty exemption (yet).

Trusts and tax fraud

Estate Planning, Living Trusts

Several Chicago-area people were indicted on tax fraud charges (right before 4/15 tax day) for selling expensive domestic and off-shore trusts to avoid income tax. Aegis Co. sold trusts at $10,000 to $75,000 per package. Clients funneled money through a series of trusts with the promise that the funds would be tax-free on returning to the client. They also deducted personal expenses as business expenses. Homes were written off as “world headquarters” of the business (thereby deducting as an expense everything related to the house including utilities, vacations and kids’ tuition).

For a good summary of why you should ALWAYS avoid any trust that claims to free you from income tax try the quatloos site that does a great job at summarizing tax scams.

Savings Bonds in Living Trust

Estate Planning, Living Trusts

Savings Bonds many times are missed in the living trust “funding” process. Clients forget about them or they think it’s too much of a hassle to transfer the bonds to their trust. If title to the bonds is not properly transferred to the client’s new living trust, and the bonds exceed $50,000 in value at death, a probate will be necessary.

It’s really pretty easy to transfer savings bonds to a living trust. Here’s what you do:

1. Round up all your original bonds;
2. Fill out form 1851 from the Dept. of Treasury;
3. Send the bonds and form by federal express to the Dept. of Treasury.

In about three weeks they will return your bonds registered in the name of your living trust.

Note: Many times the bonds are so old they are not paying interest. You can check the value of the bonds using the online savings bond calculator.

The Next Bucktown?

Real Estate-Purchases

First the boom areas in Chicago were Bucktown and Wicker Park, then Logan Square and Humboldt Park (which is now considered pricey)…now the big, new areas are Englewood and Garfield Park. The Tribune, in an excellent story, reports how these poor areas increasingly are home to 20 and 30 year old real estate bargain hunters. At the same time poorer, longtime residents are being hurt by increasing real estate taxes.

I’m not trying to rain on the parade, but the Chicago Reporter at the beginning of 2003 said that the Harrison, Austin and Marquette police districts on the West Side (that encompass these neghborhoods) represesented less than 1/5 of the city’s population but had 40% of Chicago’s murders.

The Reporter story says jobs and education will change these areas, not extra police (or, for that matter, Costco-trained suburbanites seeking condo bargains).

Internet Loans: Front Row Seat on the Titanic

Real Estate-Purchases

I caution Buyers NOT to obtain a mortgage loan to buy their house over the internet. It may be okay to get an internet loan if you are refinancing, but even then I would be wary.

An internet loan is like a front row seat on the Titanic. I represent a Seller now and his Buyer got (tried to get, is more like it) an internet loan from a broker in New York. The closing has been set and cancelled three times, because the internet lender can’t get it together and doesn’t understand our closing system here in Illinois. Don’t get me wrong, I love the internet, but it doesn’t work in a mortgage loan setting. You need a reputable local mortgage broker for mortgage. Someone that you can talk to and who knows how the system works here.

Great Elder Law Blawg

Elder Law

A really well done blawg on elder law is the site of Texas attorney Jeanne Pi. Today there’s a story on how online access by senior citizens has increased by 47% in the last four years. That’s not groundbreaking, but to me, it’s interesting. There’s also a ton on medicaid and the dreaded HIPAA. (It doesn’t look like the site can be syndicated to view through a blog reader. But you can sign up for a daily email digest instead.)

How Do Your Closing Costs Stack Up

Real Estate-Purchases

There is a good survey by bankrate.com that shows the high, low and average closing costs in catergories like “tax service fee” or “application fee.”

Title charges have risen in Illinois in the past few years and Buyers’ title charges are about $1000 now. Add to that, loan fees and other “garbage can” charges (an add-on charge like an “administrative fee” or “funding fee” found on most loans) and most Buyers are at around $2500 for total closing costs these days.

Land Trusts: How to Mess Up Your Estate

Estate Planning

I continue to be amazed at how messed up estates can get by using the combination of a land trust and a will.

I was in probate court at the Daley Center (Chicago) and witnessed this family debacle: The deceased had 6 adult children. In his will, he appointed his daughter as executor. The deceased put his house in a land trust and made 5 of his 6 kids beneficiaries of the land trust (The land trust avoids probate and is NOT part of the probate estate–but the personal property inside the house is part of the probate estate.)

The executor (who clearly has some control issues) put a padlock on the house (event though she was just one of 5 owners of the house, not THE owner.) Her brother, who was allegedly humming “You’re Not the Boss of Me” from Malcolm in the Middle, went to the house used a bolt cutter to lop off the padlock and let himself into the house. The executor-sister, horrified by her brother’s behavior, called the police who arrested her brother for trespassing. The probate judge signed an order telling the police the house was not part of the probate estate, so the brother could give it to his criminal attorney to get the case dismissed.

What a mess! This sort of thing reconfirms my belief that a revocable living trust (run by a back-up trustee who is fair and doesn’t lord it over the beneficiaries) is the best way to plan your estate. Land trusts, wills and heirs do not mix.

Single Member LLC May Not Protect Assets

Estate Planning, Real Estate-Purchases

A single-member LLC (Limited Liability Co.) is often used by real estate investors, consultants or others in business for themselves. You must be careful, though, because it will not offer the asset protection that a multi-member LLC (two or more members; husband and wife are okay) does.

If an LLC is sued and loses, the judgment creditor must obtain a “charging order” to get assets inside the LLC. The judgment creditor is then entitled to distributions from the LLC like the other members. If no distributions are made, the judgment creditor gets nothing. This is a powerful shield often used to protect assets.

A Colorado court recently ruled that the assets inside a single member LLC could be taken by the judgment creditor. Most legal commentators agree that you should not use a single member LLC if asset protection is a goal. Easy answer to this problem: Include another member and do “layers” of asset protection rather than relying on one entity.