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11/18/2023
Hard Loans
How to Hold Title
- Prepare the deed, easy way is to copy the legal description provided by the title company prior insured transfer deed. Be careful to make certain the address, lot, track, APN number are perfect
- Fill out the deed with accurate information about the property and the new owner
- Sign the deed in front of a notary public
- File the deed with the county recorder's office and pay the recording fee
- Update the property records
- Joint tenancy
- Tenancy in common
- Tenants by entirety
- Sole ownership
- Co-ownership
- LLC
- Living Trust
- Interest:
- Time
- Title
- Possession
- Shares:
- Equal
- From the same source
- Simultaneously
- Ownership:
- Passes to the other owner
- No probate
- Interest:
- Interest:
- Time
- Title
- Possession
- Shares:
- Unequal
- Different times
- Different sources
- Ownership:
- Passes to the tenant's heirs
- Interest:
11/12/2023
Stepped Up Tax Rules For Real Estate
(also applies to timber, personal property, and some types of liquid accounts)
Stepped-up basis refers to a tax policy that looks at the market value of assets
at the time a person inherits them instead of the value when the prior owner
purchased the assets.
The rules for stepped-up basis:
A stepped-up basis is a tax law
that applies to estate transfers. When someone inherits investment assets, the IRS
resets the asset's original cost basis to its value at the date of the
inheritance. The heir then pays capital gains taxes on that basis.
The tax code of the United States
holds that when a person (the beneficiary) receives an asset from a giver (the
benefactor) after the benefactor dies, the asset receives a stepped-up basis,
which is its market value at the time the benefactor dies (Internal
Revenue Code § 1014(a)).
The Internal Revenue Code (IRC) §
1014(a) states
that when a beneficiary receives an asset from a benefactor after the
benefactor dies, the asset receives a stepped-up basis. The stepped-up
basis is the market value of the asset at the time the benefactor dies. The
purpose of section 1014 is to provide a basis for property acquired from a
decedent that is equal to the value placed upon such property for purposes of
the federal estate tax.
A step-up in basis can significantly reduce your
capital gains tax. For example, if a $100,000 property increases in value
to $200,000, a step-up applies to 50% of the appreciation, resetting its cost
basis to $150,000. Not all inherited assets are eligible for a step-up
basis. Assets such as retirement accounts, including IRAs and 401(k)s, do
not receive this step-up
President Joe Biden proposed
raising taxes for long-term gains over $1 million. This means that high-income
investors over that amount would be taxed as ordinary income and pay a top rate
of 39.6% or whatever you tax rate actually is...
PROCEEDS - minus ORIGINAL COST BASIS =
PROFIT
Long-Term Capital Gains Rate x Profit = Capital Gains Tax Owed
15% capital gains rate x $ in profit = $ in capital gains taxes
This is significantly more preferable than if your capital gains are short-term in nature.
Step-Up Basis in Community Property States Is Even Better
Residents of nine different community
property states have the ability to take advantage of a double step-up basis
tax rule. This allows a step-up basis on all community property for the
surviving spouse. Community property means any asset that was accumulated
during the marriage with the exception of any gift or inheritance.
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are the nine states. In community property states, all assets and debts acquired during the marriage are considered joint property and are divided equally between spouses in the event of a divorce.
In many other states, neither assets
that are only owned by the surviving spouse or jointly owned assets do not get
the same treatment. The assets of a surviving spouse don’t get any step-up
basis and jointly owned assets only get half of the basis. However, a surviving
spouse can obtain the step-up basis on anything that is inherited from the
deceased in any state.
A stepped-up basis is a tax law that applies to estate
transfers. When someone inherits investment assets, the IRS resets the asset’s
original cost basis to its value at the date o the inheritance. The heir then
pays capital gains taxes on that basis. The result is a loophole in tax law
that reduces or even eliminates capital gains tax on the sale of inherited
assets.
Let's assume you are wealthy and you own a ten million dollar house in Emerald Bay, Laguna Beach. You never want to sell the house, you want to give it to your children when you die because no taxes are due on the gain because you inherited the house that Dad bought for $450,000.00 The basis was $450000. when you inherited it was worth three million and now your children also pass on the gain and rent that house forever. Unrealized capital gains (air money because you never sell the real estate) are not taxed as income because the owners never cashed in and sold.
A basic rule for income tax purposes is:
the basis of an asset received from a decedent is the lesser of the asset's fair market value on the decedent's date of death
or the decedent's basis in the asset on the date of death.
In most circumstances the basis will be the lesser of the two. The executor can allocate a maximum of $1.3 million in stepped-up basis to estate assets transferred to any beneficiary.
Under the current fair market value basis rules (also known as the “step-up and step-down” rules), an heir receives a basis in inherited property equal to its date-of-death value.
There is a principal that it is always best to recover basis as fast as possible from an event (death). Heirs can decide to allocate sufficient basis to cover the gains, sell some things and keep others.
GIFTS VS Waiting for the step up at death
If your grandmother decides to make a gift of stock during her lifetime (rather than passing it on when she dies), the “step-up” in basis (from $500. original purchase cost to $1 million) would be lost. Property that has gone up in value acquired by gift is subject to the “carryover” basis rules. That means the person receiving the gift takes the same basis the donor had in it ($500 in this example), plus a portion of any gift tax the donor pays on the gift. If grandmother gives it while she is alive two different taxes might be owed. If she waits for her death no tax is due.
Tell granny to leave it in her will if it is real estate.
This is not legal advice. And yes the Emerald Bay example is real.
11/10/2023
Making Old Treasures Into New Gifts
11/04/2023
Another Bank Bites the Dust 2023
The fifth bank to be shut
down in 2023.
A Siouxland bank has closed after suffering heavy losses on loans not previously identified, according to Iowa banking officials.
Banks are required
to file financial regulatory reports with the OCC. These reports must
include:
- The bank's financial condition
- The results of its operations
- Risk exposure
Banks are also required to file
Consolidated Reports of Condition and Income also known as a Call Report.
This report includes:
- A balance sheet
- An income statement
- Supporting schedules
- Details on assets, liabilities,
and capital accounts
- Details on income and expenses
Banks must file the Call Report as of
the close of business on the last day of each calendar quarter.
Trucking and some farm equipment loans went non paying when interest rates rose this year. The bank was ordered to hire a Special Loan Consultant in thirty days to manage the workouts on these bad loans. The bank failed to correct it's problem and the hammer came down.
Citizens Bank in Sac City was legally shut down Friday November 3rd, 2023 at 4:00 by the Iowa Division of Banking (IDOB).
As part of the closure
by IDOB Superintendent Jeff Plagge, the bank was placed into the receivership
of the Federal Deposit Insurance Corporation (FDIC).
The release states that bank examiners “identified significant
loan losses that had not previously been identified by the bank” while
conducting an examination of the bank. Call reports were not accurate. Officials
said Citizens Bank had a “concentration of out-of-territory and out-of-state
loans to one industry” and then suffered heavy losses from some of those loans.
The bank has since been declared insolvent.
All deposit accounts have been purchased and transferred to Iowa Trust & Savings Bank, Emmetsburg. At the time of shuddering Citizens Bank had one main office and drive-up facility.
Iowa Trust
& Savings Bank now holds the deposits.
As of its third quarter call report,
Citizens Bank reported
$65,558,000 in total assets
and $58,930,000 in total deposits.
The bank was declared insolvent. The bank had a concentration of out-of-territory and out-of-state loans to one industry and incurred heavy losses on some of those loans.
Bad loans on Auto Loans, Recreational Vehicle Loans,
HELOC s, Home Improvement Loans, Personal Loans, Mortgage Loans to Investors, Agriculture loans to farmers
for equipment and livestock, and Commercial loans.
FDIC
insures qualified deposits to $250,000.
10/31/2023
California Probate Rules
CALFORNIA Probate Rules
Probate hearings in California are
held in the Probate Department of the Superior Court in the county
where the decedent lived at the time of their death. The petition
should be filed at the Superior Court office located in the county in which the
decedent resided. This can be found on the county of record’s website.
Every county provides the blank fillable forms needed. This is not a simple
process, and the forms need to be correct, or the judge will delay your process. The forms may be hand written if legible- print very carefully. All documentation submitted by pdf must be clear and readable.
The Probate Department handles
decedents' estates, trusts, and conservatorships. It also hears petitions
to establish fact of birth, death, and marriage as well as elder abuse
petitions.
·
Probate time limits:
In California, executors or
administrators of estates have one year to complete probate. However,
extensions can be requested when delays occur. The probate process
generally takes 12 to 18 months.
·
Probate not necessary if under this
dollar amount total:
Probate is not necessary if the total
value of the assets at the time of death does not exceed $166,250. This
figure does not include vehicles and certain other assets. Since real estate property in California is high cost, many families/heirs find they will need to go through probate. You will need a copy of any mortgage payment on the real estate and HOA bills.
·
Hearing dates:
The court could set a hearing date 15
days after the petition is filed. However, most probate courts set
hearings between 30 and 45 days from filing. Some courts still allow virtual
hearings, see your county website.
·
Notice requirements
Notice must be given by first class
mail or by personally delivering a copy to each person or entity at least 15
days prior to the hearing. Each person should receive a copy of the
"Notice of Petition to Administer Estate" showing the hearing date
information.
·
Factors for attorney's fee
Rule 7.955(b) of California Rules of
Court contains a list of factors courts may consider in determining a
reasonable attorney's fee. These factors include the experience,
reputation, and ability of the attorney performing the legal services, and the
time and labor required.
Initial
filing fee for a probate case in California is $435.
Additional
fees
- Petitions: For the
appointment of a personal representative, objections to petitions, or
other court filings
- Copies: To certify copies of
court documents
- Notice: To publicize probate
notice
Fee waivers If you can demonstrate in
writing financial hardship, you can apply to the court for a fee waiver.
Attorney fees California is one of a
handful of states that allows attorneys to bill according to a percentage of
the total value of the estate. For example, lawyers can collect 2.5
percent in fees. The executor of the estate can claim the same fee.