October 9, 2018 By

Q&A: Here’s why two siblings who inherited mom’s house should prepare for an ugly family feud

Dear Liz: My mother left her house to my brother and me. He wants to use it as a rental property. I have no interest in being a landlord or in ownership. He doesn’t want to buy me out, so I’d like to sell my half interest. What are the tax issues I need to prepare for, and does my brother need to sign any documents?

Answer: You should first prepare for an ugly family feud. If the property hasn’t been distributed yet, you’ll face a probate or trust contest over the house, says Jennifer Sawday, an estate planning attorney in Long Beach. If you’ve already inherited the home, you would need to go to court to file a real estate partition action. Either way, a court action typically forces a sale or arranges for your brother to buy you out before dividing the proceeds — minus all the attorneys’ fees, of course. (This is not a do-it-yourself situation, so you’ll both need to hire lawyers.)

That may be the best of bad options if your brother won’t see reason. Being a landlord involves considerable hassle and liability. You shouldn’t be forced into such a business — or any business — with a family member.

You can use the threat of legal action as a bargaining chip, since you both will net a lot less from your inheritance once the court gets involved. It makes much more sense for your brother to agree to a sale or get a mortgage to buy you out. Let’s hope he comes to that conclusion as soon as possible.

Filed Under: Estate planning, Inheritance, Q&A, Real Estate Tagged With: , ,
September 26, 2018 By

Wednesday’s need-to-know money news

Today’s top story: One couple’s real estate journey to a home in Philadelphia. Also in the news: What rising DTI limits mean for your next mortgage, why the cashless trend doesn’t have all shoppers sold, and bad money habits you could be guilty of.

How I bought a home in Philadelphia
One couple’s real estate journey.

What Rising DTI Limits Mean for Your Next Mortgage
Know your debt-to-income ratio.

Why the Cashless Trend Doesn’t Have All Shoppers Sold
For some, cash is still king.

Are You Guilty of These Bad Money Habits?
Sound familiar?

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August 6, 2018 By

Q&A: How to get results when you complain to your mortgage company

Dear Liz: Last year my mortgage was sold to another company. I didn’t know that I had a new loan number, so my automatic payments weren’t posted properly. With the help of my bank, I was able to sort this out but not before the new company reported me as delinquent to the credit bureaus. I have never been late with a payment in 15 years.

I pleaded with the company to remove the delinquency from my credit report, but they declined, saying their records show that they fulfilled their obligation by notifying me that they are my new lender. Do I have any recourse and what are my options in getting this delinquency removed from my credit report?

Answer: You can try disputing the delinquency with the credit bureaus, but that is a highly automated process. The company may check its records and respond to the bureaus as it did to you, refusing to remove the black mark. It’s worth a shot, but far from guaranteed.

You most likely will need to get to the right human being to help you. Sometimes when you run into a brick wall with customer service, you can turn things around by appealing to someone’s expertise. Asking the customer service rep, “If this happened to you, what would you do to fix it?” may get you pointed in the right direction.

Of course, you may have been talking to a call center worker with little training and even less authority. If that’s the case, ask to speak to the manager. You might also write a letter to the company’s chief executive, asking directly for help.

Another option is to involve regulators. Filing a complaint with the Consumer Financial Protection Bureau or your state attorney general may get results.

A single missed payment can knock more than 100 points off good credit scores, plunging you into the “average” category and causing you to pay more for such things as credit card interest, insurance and cellphone coverage. It may take considerable effort, but it’s worth fighting back.

Filed Under: Q&A, Real Estate Tagged With: , ,
July 26, 2018 By

Thursday’s need-to-know money news

Today’s top story: 7 tactics to help car-buying newbies bargain like a boss. Also in the news: 5 ways to save energy during the dog days of summer, what you need to know about buying a house in 2018, and how a freelancer turned dog sitting into a successful side gig.

7 Tactics to Help Car-Buying Newbies Bargain Like a Boss
Don’t be intimidated.

5 Ways to Save Energy During the Dog Days of Summer
Staying cool.

Buying a House in 2018: What You Need to Know
Things have changed a bit.

How a Freelancer Turned Dog Sitting Into a Successful Side Gig
Getting your side hustle on.

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July 23, 2018 By

Q&A: Figuring the tax toll for an inherited house

Dear Liz: I inherited my home when my husband died. If I sell this house now at a current market value of around $900,000, what will be the basis of the capital gains tax? I think at the time of my husband’s death, the house’s market value was $400,000.

Answer: Based on your phrasing, we’ll assume your husband was the home’s sole owner when he died. In that case, the home got a new value for tax purposes of $400,000. That tax basis would be increased by the cost of any improvements you made while you owned it. When you sell, you subtract your basis from the sale price, minus the costs to sell the home, such as the real estate agent’s commission, to determine your gain. You can exempt up to $250,000 of the gain from taxation if it’s your primary residence and you’ve lived in the house at least two of the previous five years. You would owe capital gains taxes on the remaining profit.

Here’s how the math might work. Let’s say you made $50,000 in improvements to the home, raising your tax basis to $450,000. You pay your real estate agent a 6% commission on the $900,000 sale, or $54,000. The net sale price is then $846,000, from which you subtract $450,000 to get a gain of $396,000. If you meet the requirements for the home sale exclusion, you can subtract $250,000 from that amount, leaving $146,000 as the taxable gain.

If your husband was not the sole owner — if you owned the home together when he died — the tax treatment essentially would be the same if you lived in a community property state such as California. In other states, only his share of the home would receive the step-up in tax basis and you would retain the original tax basis for your share.

Filed Under: Inheritance, Q&A, Taxes Tagged With: , , , ,
July 16, 2018 By

Monday’s need-to-know money news

Today’s top story: How to protect your money from criminals. Also in the news: How to fight about money and stay madly in love, how to have “the talk” about finances with your parents, and deciding to reroute some of your retirement savings to pay for a house.

Banking Has Changed, but Criminals Haven’t — Here’s How to Protect Your Money
Staying on guard.

How to Fight About Money and Stay Madly in Love
Don’t let money get in the way.

Have ‘The Talk’ About Finances With Your Parents Already
Having the tough conversations.

Should You Reroute Some of Your Retirement Savings to Pay for a House?
One of the biggest decisions you’ll ever make.

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July 9, 2018 By

Q&A: Reverse mortgages have improved but still require caution

Dear Liz: You’ve written about the potential financial flexibility and options for preserving quality of life for seniors by using a reverse mortgage line of credit. I believe there is a great need for much more cautionary advice regarding reverse mortgages.

Someone I know entered into a reverse mortgage and the consequences have been disastrous. She was barely past the minimum age of 62 when she got the loan and took the lump sum option, only to spend it hastily on various purchases and debts.

Having no income other than Social Security, and almost nonexistent savings, she faces many years of figuring out how to pay property taxes and ongoing maintenance costs to avoid foreclosure. So although she has her home, it’s a precarious situation from year to year. She also no longer has an asset that could be used for long-term care or other expenses because the reverse mortgage makes it unlikely the owner will receive any leftover proceeds after paying off the lender.

Answer: You didn’t say when your friend got her reverse mortgage, but the rules for lump-sum payouts have been tightened under the Federal Housing Administration’s Home Equity Conversion Mortgage program.

In the past, borrowers could take 100% of the loan proceeds upfront. Today, only 60% is typically available in the first year. The total amounts that can be borrowed overall have been reduced as well. These changes were meant to shore up the program’s finances, but they also could lead to fewer situations like your friend’s.

That said, people should be extremely careful about encumbering their homes in retirement. Prospective borrowers have to meet with HECM counselors to discuss a reverse mortgage’s financial implications and potential alternatives, but they would be smart to also meet with a fee-only financial planner.

Filed Under: Q&A, Real Estate Tagged With: , ,
June 27, 2018 By

Wednesday’s need-to-know money news

Today’s top story: What 3 Big Brother winners did with their $500K payday. Also in the news: Financial wisdom for young adults, 3 ways to avoid a bad student loan, and when to hire a mortgage broker.

What 3 ‘Big Brother’ Winners Did After Their $500K Payday
What happened when the cameras were turned off.

It’s Not All About Money: Financial Wisdom for Young Adults
How to think about money as you begin adulthood.

3 Ways to Avoid a Bad Student Loan
Take a close look at the fine print.

When to Hire a Mortgage Broker
When to bring in the middleman.

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June 25, 2018 By

Q&A: Wife should get her name on deed

Dear Liz: My daughter, who is a stay-at-home mother of two, recently bought a home with her husband. They have been married seven years. I recently discovered that her name isn’t on the deed to the home. I don’t know why, but it doesn’t sound good to me. What are her potential issues?

Answer: The issues depend on where she lives. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

If your daughter lives in one of those, assets acquired during marriage, including a home, are generally considered community property owned equally by both spouses. Her husband, ideally, should place her on title via a deed to reflect true ownership or place it in a trust to provide for his wife. However, if her husband should die without bequeathing her the property, the home could go to probate proceeding, and the wife would have to provide proof that it was community property to receive all of it, says estate planning attorney Jennifer Sawday of Long Beach.

In other states, different rules apply. Typically assets held in one person’s name are that person’s property. If the husband has a will, he could leave the house to your daughter — or not. Should he die without a will, she could wind up sharing ownership of the house with others, such as children from a previous marriage.

Filed Under: Estate planning, Q&A, Real Estate Tagged With: , , ,
June 12, 2018 By

Tuesday’s need-to-know money news

Today’s top story: How 1% savings hikes can spice up retired life by $1 million. Also in the news: 7 ways to save at Disneyland, why you shouldn’t let a down payment scare you from buying a home, and how Millennial men and women invest differently.

1% Savings Hikes Can Spice Up Retired Life by $1 Million
The earlier start, the better the boost.

7 Ways to Save at Disneyland — No Magic Required
Keeping your money away from the Mouse.

Don’t Let a Down Payment Scare You Off
Help is available for first-time buyers.

401(k) investing: How Millennial men and women invest differently
It goes back to childhood.

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