3 Ways to Pass Down a Home

3 Ways to Pass Down a Home

April 9, 2023  Estate Planning

The pros and cons of different methods for leaving a home to your heirs.

When it comes to estate planning, a family home can be among the most valuable—and complicated—assets to pass down.

"It's perfectly natural to want to see a cherished home stay within the family," says George Pennock, director of tax, trust, and estate at Schwab Wealth Advisory, Inc. "But you need to think about not only your own needs and wishes but also those of your heirs."

For example, your child may love the family home and all the memories that go with it, but do they actually want to live there? If you have multiple heirs, is it realistic for them to co-own the property, or will such an arrangement create conflict?

You also need to consider the role the house will play in your later years. "Do you plan to stay in the home, or is it possible you may need or want to move at some point?" George asks. "All of this factors into how—and whether—you transfer the property to your kids."

With that in mind, here are three ways to pass along a home to your heirs—both during and after your lifetime.

1. Sell it

If you're looking to move or put your home's equity to use elsewhere, selling the home to a child or other heir could be a good option. Doing so removes the property from your taxable estate and establishes a new cost basis—meaning the capital gains on any future sale will be calculated using the value of the home on the date of the transfer rather than your original purchase price.

Although you might be tempted to sell the home at a low price, be careful not to go below its fair market value. Otherwise, the difference between the sale price and the market value could be subject to gift taxes.

2. Gift it

As generous as it is to gift a home to an heir during your lifetime, it could have negative tax repercussions. That's because such a gift counts toward your lifetime gift tax exemption.

To continue reading, please go to the original article here:

https://www.schwab.com/learn/story/3-ways-to-pass-down-home?cid=29090689|6316021|187962617|356606035

If You’re Not Thinking About Real Assets, You’re Going To Get Left Behind

If You’re Not Thinking About Real Assets, You’re Going To Get Left Behind

Notes From the Field  By Simon Black   August 14, 2023

“Scary” is the word that the Wall Street Journal used this weekend to describe the looming financial crisis in the US.  They said bluntly, “Washington has laid the seeds of a crisis that Wall Street can no longer ignore.”

I’ve been writing about this for 14 years; back then, it was highly controversial... almost conspiratorial... to suggest that the US government was in deep financial trouble. Today it’s front page news in the most prominent financial publication in the world.

To give you an idea of the problem, we can once again look at the government’s own data:

According to the Treasury Department’s most recent report from July 31, they’ve taken in $3.69 trillion in tax revenue so far this fiscal year.

Yet they’ve spent nearly $1.8 trillion on Social Security and Medicare, $726 billion paying interest on the debt, almost $900 billion on the military and veterans benefits.

In short, there’s only $284 billion left over for everything else in government. National parks. Homeland Security. The light bill at the White House. And $284 billion doesn’t go very far anymore.

Bear in mind that these people have spent (rather ominously) $666 billion so far this fiscal year just on “income security” alone, which is basically welfare and food stamps.

That’s why the budget deficit is already $1.6 trillion; by the time the fiscal year ends in September, it will probably be around $2 trillion... which is a complete train wreck by any standard.

Even worse is that this isn’t a one-off bad year. A $2 trillion deficit is actually a pretty good year for these people.

Before COVID, at the close of the 2019 Fiscal Year, the US national debt was $22.7 trillion. Today it’s nearly 50% greater, at $32.7 trillion. And it grows leaps and bounds every year.

The scariest part of the problem is that most of the US national debt was accumulated over the past 10-15 years (and especially the last 3-4 years) when interest rates were historically low.

That’s why the average interest rate on US government bonds back in, say, August of 2021, was just 1.45%. Rates were super low back then, and the government could borrow for almost nothing.

Today it’s a different story. All of the new debt that the Treasury Department borrows today carries much higher rates, upwards of 5%.

And this is an enormous problem for the US government: MOST of the current national debt will mature over the next five years.

But since Uncle Sam doesn’t have $32 trillion lying around, they won’t be able to pay that money back. Instead, they’ll refinance the debt by issuing new bonds to pay back the old bonds. Frankly it’s a bit of a Ponzi scheme.

But the new debt they issue won’t be at the ultra-low rates of the past. The government will have to pay whatever the current interest rates are— perhaps 5% or more.

And if the average interest rate on US government debt rises to 5% over the next few years, then they would have to spend a whopping $2 trillion just to pay interest each year.

On top of that, the annual bill for Social Security and Medicare would reach roughly $3 trillion.

Think about it— JUST paying interest, plus Social Security and Medicare, would exceed ALL federal tax revenue.

The US government will find itself in a position where they’ll need to borrow money and go deeper into debt just to fund the military, let alone everything else the government does.

Again, I’ve been writing about this for 14 years, so this analysis and conclusion is nothing new for long time readers.

But this looming fiscal crisis is very quickly becoming a mainstream issue. This means you’ll start seeing it more in the news... which will compel politicians to say something.

Their knee jerk reaction will be to raise taxes... which conforms to the rising popularity of socialism. For some reason there are still growing numbers of people who foolishly believe that high taxes and government spending create prosperity.

The other thing that is almost inevitable is that the Federal Reserve will start slashing interest rates again. No Fed Chairman wants to be held responsible for bankrupting the federal government. The only way to push this crisis further down the road is by returning to historically low rates.

So we can probably expect a reduction in interest rates, simply to bail out the federal government. And this would most likely lead to sustained, higher inflation.

In theory this is all fixable. America still has time to solve its gargantuan challenges. But time is rapidly running out.

And it’s for this reason why I’ve written for so long about having a Plan B... because, based on the government’s current trajectory, they’re just making things worse.

One key element of a Plan B in my opinion is considering real assets.

A real asset is a valuable resource that requires hard work, talent and ingenuity to produce, and cannot be conjured out of thin air by politicians or central bankers.

Real assets are scarce. They have universal value. And they are productive, or can at least be put to productive use.

Gold is an obvious example. It takes a lot of effort to produce an ounce of gold, and gold can be put to productive use. Most of all, central banks cannot conjure it out of thin air like they can print trillions of dollars.

This is the case with most commodities as well.

However some commodities are far more valuable and in-demand than others. Agriculture and energy, for example, are the most important resources in the world and will always be in demand.

Productive technology is also an important real asset; anything that makes the world better, faster, and cheaper has value (which is a key distinction from ‘consumer technology’, which just involves swiping and scrolling and wasting time).

Real assets are important because, historically and logically, they tend to perform extremely well in a fiscal crisis. People start looking for safe havens— and the best safe havens in a crisis are quality, valuable, scarce resources.

The time to be thinking about this is now; even though the fiscal crisis is completely obvious, most people are ignoring it... and hence ignoring real assets.

For now this is a huge benefit to investors, because many real assets (including many commodities, commodity-based businesses, productive technology) have never been cheaper.

So there are a number of bargains out there that could protect your wealth down the road in the event that America’s fiscal crisis continues to unfold.

To your freedom,   Simon Black, Founder   Sovereign Man

https://www.sovereignman.com/investing/if-youre-not-thinking-about-real-assets-youre-going-to-get-left-behind-148040/

What To Know If You Deposit More Than $10K Into Your Checking Account

What To Know If You Deposit More Than $10K Into Your Checking Account

Angela Mae   Mon, August 14, 2023

If you plan to deposit $10,000 or more into your checking account, there are a few things you should consider first. By law, banks have to report deposits that exceed a certain amount.

Not only that, but many bank accounts come with maximum deposit restrictions. You may also be subject to certain fees when making such a large deposit. If you frequently make large deposits, you should also watch out for any potential scams or fraudulent activity. But even if this is a one-time thing, it’s still important to know about these factors and how they might affect you.

Banks Must Report Large Deposits

“According to the Bank Secrecy Act, banks are required to file Currency Transaction Reports (CTR) for any cash deposits over $10,000,” said Lyle Solomon, principal attorney at Oak View Law Group. CTRs typically include the name of the individual, their account number, Social Security number and taxpayer identification number — all of which are verified and recorded by the bank.

Banks must file CTRs to the Financial Crimes Enforcement Network (FinCEN), which is part of the U.S. Department of the Treasury. Some banks will do this manually, while others will automate the process.

“The creation of a CTR does not mean that your account will be frozen, nor that the Men in Black will be visiting your home,” said Herman (Tommy) Thompson Jr., CFP, ChSNC, ChFC certified financial planner at Innovative Financial Group. For banks, it’s considered standard procedure and isn’t a cause for concern if the deposit is legitimate.

These procedures exist to help prevent money laundering, counterfeit deposits and similar financial crimes from occurring. By requiring banks to report deposits of $10,000 or more, the government can more easily keep track of monetary transactions. As long as your deposits are legitimate, you won’t have anything to worry about.

Structuring Is Illegal

To continue reading, please go to the original article here:

https://news.yahoo.com/finance/news/know-deposit-more-10k-checking-130016900.html

What the $2.04 Billion Lottery Winner Did With Their Lump Sum Payout

What the $2.04 Billion Lottery Winner Did With Their Lump Sum Payout

Sean Fisher, AI Editor   Mon, August 14, 2023 

For most, winning the lottery is a distant dream. But for Edwin Castro, it became a reality when he struck gold with a $2.04 billion Powerball jackpot in November 2022, the largest in history.

Choosing a one-time lump-sum payment, Castro received an astonishing $997.6 million, just short of a billion. Here’s a look at how he has used his unexpected fortune.

High-End Real Estate Ventures

Shortly after his massive win, Castro treated himself to two opulent homes in California. He first bought a breathtaking $25.5 million mansion in Hollywood Hills in March 2023, three months after he claimed his lottery prize. According to several reports, the estate boasts an impressive 13,500-square-feet of luxury, with features like five bedrooms, seven bathrooms, a game room, a wine cellar, a movie theater, a bar, a fitness studio, and a spa.

In addition to its rich interior, the Hollywood Hills home offers the epitome of outdoor luxury, with an infinity pool, a fireplace, and seven-car garage, all encased by glass walls that provide a panoramic view of the Los Angeles cityscape.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/2-04-billion-lottery-winner-120009921.html

6 Unusual Expenses Worth Paying Off Before You Retire

6 Unusual Expenses Worth Paying Off Before You Retire

Vance Cariaga   August 12, 2023

You can expect to experience many changes in retirement, and one of the biggest has to do with your finances. Unless you decide to keep earning money on the side, you'll be living on a fixed monthly income that doesn't include the normal work raises, bonuses or opportunities to increase your income by switching jobs.

This shift puts a premium on reducing your expenses in retirement to give yourself plenty of financial breathing room. According to an analysis from Fidelity Investments, you can expect to spend between 55% and 80% of your yearly work income throughout your retirement. About 15% of your post-retirement living expenses will go to healthcare costs alone.

One thing you will want to do is pay off as many debts as you can, including mortgages, car loans, student loans, medical bills and credit cards. Entering retirement free of debt can solve a lot of financial problems down the road.

You should also pay off other expenses that could potentially tie you down financially in retirement -- including expenses you've built up that don't fall under the normal financial umbrella.

Keep reading to learn about six unusual expenses that are worth paying off before you retire.

Personal Bank Loans

Personal loans provide lines of credit that can be used for everything from home renovations and medical bills to weddings, but they don't come cheap. The average overall interest rate for personal loans (as of Aug. 8, 2023) is a sky-high 21.4%, Business Insider reported. The average low rate is 10.17%, while the average high rate is 31.91%. Given these rates, paying off personal loans before retiring is one of the best financial moves you can make.

Family Loans

Borrowing money from family members has become more commonplace in recent years due to the effects of the COVID-19 pandemic, high inflation and soaring home and mortgage costs. 

If you have a family loan, you probably pay much less interest than you would with a commercial loan -- though you have to pay some interest in order for it to be considered a loan instead of a gift. Paying off a family loan before you retire serves two purposes. 

First, it lowers your overall debt load. Second, it will probably ease your personal relationship because the financial element is no longer involved.

Divorce Fees

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/retirement-savings-6-unusual-expenses-130055142.html

What to Do If You Get Rejected for a Loan

What to Do If You Get Rejected for a Loan

Rachel Christian, CEPF®  Senior Writer  AUGUST 2, 2023

Some of the links in this post are from our sponsors. We provide you with accurate, reliable information. Learn more about how we make money and select our advertising partners. So, you’ve applied for a loan, and unfortunately, things didn’t go as planned.  Well, you’re not alone.

In June 2023, the overall rejection rate for credit applicants increased to nearly 22% — its highest point since June 2018 — according to a report by the Federal Reserve Bank of New York.

The increase affected people in different age groups and was highest among people with credit scores below 680, the report found.

So what happens when you get rejected for a loan? We’ll explain what it takes to get a loan, why lenders might slam the door on your application and most importantly, how you can improve your odds and even snag a loan with bad credit.

Requirements for a Loan

You’re eager to get a loan, but do you know what lenders look for? Let’s start with the basics.

Whether you’re looking to a buy a house or get a personal loan, you typically need to meet these requirements:

Good Credit Score: Lenders use your credit score to assess your risk as a borrower. A good credit score usually falls in the 670 to 739 range. The higher your score, the better your chances of approval.

Steady income: Lenders need to see that you have a stable income to repay the loan, such as a regular job or self-employment income.

Low Debt-To-Income Ratio: This is the proportion of your monthly debt payments compared to your monthly income. A lower debt-to-income ratio signals better financial health. Lenders usually look for a DTI of 40% or less.

Positive Credit History: A solid credit history shows lenders you’ve managed credit accounts responsibly in the past.

Collateral: With a secured loan, an asset (like a car or home) acts as collateral to help offset the risk. This can be an option if you have bad credit or want a lower interest rate.

Is this your first time applying for a loan? Check out our explainer on how loans work.

6 Reasons Why You Might Get Denied for a Loan

To continue reading, please go to the original article here:

https://www.thepennyhoarder.com/debt/denied-for-a-loan/

Are You Rich? Then You Should Probably Have This

Are You Rich? Then You Should Probably Have This

Ben Geier  Thu, August 10, 2023

Trusts are useful financial tools, often used for the purpose of planning an estate. A trust is essentially a legal framework into which ownership of assets can be placed. These assets can include financial products like stocks and bonds, or it can include real physical property, like land, jewelry or vehicles. There are a number of reasons one might use a trust, including, but certainly not limited to, estate planning scenarios. If you think you might need a trust or you want help setting one up, consider working with a financial advisor.

How Property Trusts Work

Technically speaking, there isn’t a specific type of trust known as a “property trust.” Any trust can be filled with a myriad assets, including property and real estate. If you hear reference to a property trust, it's more than likely either a revocable trust or an irrevocable trust. Both of these can be seeded with property, along with other assets like investments, family memorabilia and cash.

A revocable trust is one where you have the ability to add property and take it out throughout your lifetime. For instance, if you store a home in a revocable trust, you can remove it from the trust. At a later date, you can then return it to direct ownership if that makes it easier to sell. You can also remove personal effects, such as a family heirloom, if you want to pass it on to another family member. A revocable trust can also be abolished if it's no longer necessary.

An irrevocable trust, on the other hand, is exactly what it sounds like - a trust that cannot be abolished and cannot have property removed from it. Irrevocable trusts are best used to shelter property that the current owner is not going to sell or otherwise need out of the trust.

If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Who Needs a Property Trust?

To continue reading, please go to the original article here:

https://news.yahoo.com/finance/news/property-trust-needs-one-153536214.html

7 Tips to Save You When You Feel Like Shopping

7 Tips to Save You When You Feel Like Shopping

By Karen Trefzger

Fall is around the corner, and if you’re anything like me, that can make you feel like shopping.  New clothes, new home décor, those pretty autumn-themed dishes, cute earrings, a fragranced candle – you name it, we may just feel we need something new to celebrate the change of seasons.

But every time we follow this need-to-shop impulse, we may be adding to our clutter.  We may be adding to debt (or at least reducing what we can save or give).  We may be giving in to our desire for more, more, more (and doesn’t that look like a simple case of greed?).

I know it’s fun to get something new.  At first, it feels amazing.  You tell your friends, maybe even post pictures on social media.  But very quickly, that new thing becomes background noise, and then you need the next purchase to feel the excitement all over again.  You never find satisfaction.

Instead, let’s think of ways to renew our appreciation for what we own and take advantage of all that’s available to us.

7 options to control needless spending

1.  Get outside.

We were created to live on this earth, and its perfect design already takes into account our desire for both variety and stability.  Each season has its gifts – all new and yet familiar.

So get outside and enjoy the roadside wildflowers (they won’t last long). Relish summer’s variety of sunny skies and thunderstorms, fresh cool mornings and long warm evenings. Look for birds building nests and babies loudly demanding to be fed. Can you drive to the country and visit a farm stand for the freshest produce?

Go on a walk, a bike ride, a hike, or a picnic today.

2.  Swap belongings.

This might be an old trick you use with your children’s toys:  box up some of the things they don’t play with as often and store them for a few months.  Then when you bring them out again, it feels like everyone got a bunch of new toys!

Guess what – this works with adults too.  You know how when you put up the Christmas decorations your house feels new and noticeable, even if the decorations are the same ones you’ve been using for years?  Get that same feeling by swapping framed photos, wall art, lamps, throw pillows, and other small decorative items.  You can even swap chairs, side tables, and other small pieces of furniture.  Move things from the living room to your bedroom to the dining room to the guest room, entry hall, or home office.

As you do this, you can handle and dust everything, and make sure it’s something you really love and want to keep.  Then you can enjoy noticing your same belongings in different surroundings and different groupings.  It’s a way to keep everything fresh and in the spotlight, because you got out of a rut and shook things up a bit.

To continue reading, please go to the original article here:

https://nosidebar.com/7-tips-to-save-you-when-you-feel-like-shopping/

The Relative Value of Money

The Relative Value of Money

Financial Panther - Last Updated on April 17, 2023

There’s a concept that I’ve been thinking about over the past couple of years, especially as I’ve made this transition from a full-time, professional, real job, to a quasi-fake job as a blogger and gig economy worker. It has to do with a concept you could call the relative value of money.

When I think about what that means, it’s basically the idea that money you earn from one activity might be worth more to you personally compared to the money you earn from another activity. In fact, it might be worth so much more to you that you’ll opt to spend your days earning money in that manner even if it means you’re making less money from an objective standpoint. This concept has really come into clearer focus to me over the past few years and I think it helps explain why I’ve made a lot of the work decisions I’ve made.

One of the weird things I’ve done consistently over the past few years is doing pretty low-level side hustles using sharing economy and gig economy apps. From an objective standpoint, it really didn’t make much sense for me to do all of this stuff. At the peak of my lawyer career, I was making $300 or more per day from my salary, obviously more than enough to live very comfortably. And yet, even though I made all of this money, I still chose to spend my spare hours doing silly things like delivering food to people on my bike and selling stuff I found in the trash.

The common criticism I’d get was that doing this stuff was a waste of my time. The better use of my time would be to focus on my job and continue to progress in my legal career. Eventually, I could try to become a partner somewhere or just do something to continue to increase my salary, or at least to increase my prestige.

In truth, that’s probably what I should have done, at least if we’re looking at pure numbers. I could obviously make much more money as a lawyer than I could from all of the stupid things I was doing. But the few bucks I made doing my random gig stuff felt so much more valuable and rewarding to me compared to any dollar I earned from my regular paycheck.

The thing I’ve learned to value more and more is control over my life. I suspect that’s something a lot of people on the path to financial independence value too. The money I made from my day job, however, was the exact opposite of control over my life. I had to be at the office at a certain time, do things that other people told me to do, and basically, plan my life around my job. It made me feel trapped.

A dollar might have the same objective value no matter how you choose to earn it. But how you personally value that dollar is another matter. I think that’s worth thinking about.

Thinking About The Relative Value Of Money

To continue reading, please go to the original article here:

https://financialpanther.com/the-relative-value-of-money/

The US Credit Score Went Down — What Does That Mean for Your Money?

The US Credit Score Went Down — What Does That Mean for Your Money?

Jordan Rosenfeld  Thu, August 10, 2023

Most of us know that adults have a personal credit score that reflects how well they handle their debt-to-income ratio, how quickly they pay off debts and how long they hold these debts, among other things. This personal credit score is the way institutions and people that might loan money or make other fiscal decisions decide whether it is low-risk enough for them to do so.

The United States also has an overall credit score, typically bestowed upon it by one of a few credit rating agencies such as Moodys, Fitch or Standard and Poors. Fitch just delivered America a bit of a blow by “downgrading” its rating from “AAA” to “AA+.” What does this mean for the country and for your personal money? Experts explain.

Why Did Fitch Downgrade the US?

Fitch made this assessment based on “the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance…” The rating takes into account how well a country is doing in relationship to other “peers” and the U.S. is just not rating high right now.

Fitch actually threatened this action back in May when Democrat and Republican lawmakers could not agree on the borrowing limit and the Federal Treasury was scarily close to running out of money. The rating downgrade is partly a way to get governments and their treasuries to think carefully about their decisions’ effects on the economy at large.

Fitch made its downgrade decision by looking at economic indicators, which are not pointing to a rosy next few years. Fitch expects that over the next three years, things like tax cuts, additional spending and “political gridlock” will cause our nation’s finances to “deteriorate.” It is also taking into consideration factors such as the $1.39 trillion federal deficit, which is an increase of 170% from where it was around the same time last year.

What the Credit Score Drop Means

“A credit rating is simply a rating… that is gauging the likelihood of a credit default from companies, governments, central banks, or municipalities, etc.,” said Shawn Stone, CRPC®, director advisory services at Retirement Planners of America.

The higher the rating, the lower probability of a default. The lower the rating, the higher probability of a default. “The lower the rating, the higher yield providers must give on their debt issuance to entice people to buy their bonds creating debt to operate on. Same but in opposite of higher rated companies, they will offer lower rates on debt/bonds,” he said.

No Immediate Cause for Concern

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/us-credit-score-went-down-120040254.html

Five Freedoms

Five Freedoms

Jonathan Clements  HumbleDollar

FOR THREE YEARS, I lived on Roosevelt Island, in the middle of New York City’s East River. It’s a wonderful place—a quiet, friendly, low-crime oasis in the middle of one of the world’s largest, most frenetic cities.

During my time there, the Franklin D. Roosevelt Four Freedoms Park opened on the island’s southern tip. The park is named after a 1941 FDR speech, where he articulated “four essential human freedoms”: freedom of speech, of worship, from fear and from want.

FDR’s speech was inspiring. Managing money is altogether more prosaic. Still, I’d argue that our pursuit of money is also about a hunger for freedom—with five dimensions:

1. Freedom from fear.

We all want a sense of financial security—and yet all too many folks lead fragile financial lives. If our income barely covers our expenses, we may be okay if it’s a typical month. But so few months turn out to be typical.

We face frequent financial shocks, some large, some small. The car breaks down. The roof needs to be replaced. We lose our job. If we have scant savings and little financial breathing room in our monthly budget, such shocks can leave us scrambling to cover the bills and send our anxiety soaring.

As I mentioned last week, a Consumer Financial Protection Bureau study found that the sum we keep in liquid savings—meaning cash, checking accounts and savings accounts—has a huge impact on financial well-being. The price to escape much of our financial fear? All it may take is a few thousand dollars tucked away in the bank.

2. Freedom from financial dependence.

We’re all dependent on other folks. Even billionaires need others to produce the goods and services they consume, to buy the investments they sell and to purchase the products their businesses make.

But there are degrees of financial dependence—and the more dependent we are, the shakier our financial life can seem. I don’t like being financially dependent on others, and I can’t imagine many do.

Don’t get me wrong: When the day comes, I won’t have any qualms about claiming my Social Security check. But I would never want to be entirely dependent on a government program, a charity or family members.

Even working for others strikes me as a form of financial dependence, though it’s one most of us can’t avoid. It’s terrible to feel our livelihood hinges on a capricious boss. True, if we’re unhappy, we can always take our labor elsewhere. But switching employers is a costly, anxiety-inducing business.

3. Freedom from financial obligations.

To continue reading, please go to the original article here:

https://humbledollar.com/2020/01/five-freedoms/