Archives for March 2011

Protecting Your Real Estate Purchase from Lawsuits by Joe Szabo, Scottsdale Real Estate Team

March 28, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

A common strategy to avoid probate costs is to hold property in joint ownership – however, creditors can often seize such property if either owner owes them money. Another drawback is that joint ownership supercedes the provisions of any will, so loved ones might get accidentally disinherited.

Here are some alternatives to joint ownership that offer some protection against creditors:

Place the property in a spouse’s name – this can only work, however, if it’s demonstrated that the spouse isn’t fraudulently protecting assets. Also, if the spouse dies unexpectedly, the property will end up in his or her probate estate.

Place the property in a spouse’s revocable living trust – once again, however, it must be demonstrated that the conveyance isn’t fraudulent.

Place the property in an irrevocable living trust – the longer it’s there, the better legal protection it provides, just as long as the trustor is not also a trustee.

Place the property in your children’s names – once again, however, it must not be fraudulent. One drawback is that the property may become vulnerable to a child’s creditors.

Use a corporation – deeding your home to a corporation, with your family as its officers and shareholders, provides substantial legal protection. Its main drawback is tax disadvantages.

Use a limited partnership – this may provide the best property protection, but the complex rules dealing with business purpose and other requirements to set one up will need an expert to correctly implement it.

Tenancy by the entireties – twenty-three states allow this form of joint ownership by married couples, which precludes the creditors of one spouse from seizing any assets, since each spouse is presumed to own the entire asset. This plan only provides protection if one spouse is being sued, however.

In order to protect yourself from lawsuits by visitors to your home who suffer some injury, make sure that you’ve taken all reasonable precautions to address any potential dangers, and always carry home liability insurance. If you wish to augment your insurance policy, consider adding an “umbrella liability policy,” which provides much higher limits to your homeowner and automobile policies than either one provides on its own.

Most states allow a “homestead exemption” to protect at least a portion of your home equity from suits or liquidation in a bankruptcy. If your home equity is higher than the exemption in your state, however, you may be forced to sell your home and you’ll only receive the statutory amount allowed. Check your state laws for more information.

Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent or a Real Estate Attorney. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area. Award winning Realtors and Re/MAX top producers, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Listings.

Protect Your Property through Living Trusts Part 2/2 by Joe Szabo, Scottsdale Real Estate Team

March 25, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

This is Part 2 of 2 of our Protecting Your Property through Living Trusts.

Living trusts can also protect a spouse’s assets from seizure – unless fraud is proved. Both spouses must convey their assets directly to the trust of the spouse who’s less vulnerable to lawsuits. Preferably, the spouse less vulnerable to lawsuits is the trustee. The right to alter the trust should belong solely to the less vulnerable spouse. The trust must file its own income tax return with its own ID number.

If both spouses are equally vulnerable to lawsuits, however, it’s unlikely that a living trust will provide any protection. If you wish to protect your children, you can create a Spendthrift Trust, which can prevent a creditor from seizing the trust’s assets.

If the trustor retains the power to change the trust, however, that may be sufficient for a court to allow the trustor’s creditors to seize its assets. An Irrevocable Trust can’t be changed or revoked by anyone, including the trustor. It’s usually not reachable by creditors as long as the trustor is independent of the trust, and proper income and disbursement records are maintained.

Another way to avoid or delay creditors is to create a foreign trust. That way, creditors have to sue in a foreign court for access. Finally, give the trustee the right to extend the trust’s term to prevent creditors from seizing a beneficiary’s interest.

Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area. Award winning Realtors and Re/MAX top producers, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Listings.

Protect Your Property through Living Trusts Part 1/2 by Joe Szabo, Scottsdale Real Estate Team

March 21, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

This is Part 1 of 2 of our Protecting Your Property through Living Trusts.

There are many different kinds of trusts, but Living Trusts all have these characteristics in common:

It contains property.

It owns the property, but the principal and/or income may be disbursed to others.

The person who holds legal title to the property is called the trustee.

The person who receives the benefit of the property is called the beneficiary.

The person who creates the trust is the trustor.

The person who places the property inside the trust is called the settlor (the trustor and settlor are almost always the same person).

A properly drafted trust will specify the benefits the beneficiary is to receive and the procedures that the trustee must follow. Although there are three titles associated with a trust (trustee, beneficiary, and trustor/settlor), one person can have two or even all three titles, though a trust may lose many of its income tax and lawsuit protection advantages when the same person is both trustee and beneficiary.

Generally speaking, living trusts won’t protect your assets from lawsuits or liens.

People usually establish living trusts for the following reasons:

Probate can be avoided on the assets held in the trust.

Bypass and marital trust tax provisions ensure that assets held in the trust for a spouse or child will eventually pass to other heirs, saving estate taxes.

It’s revocable, meaning it can be changed any time.

It can appoint competent people to manage your affairs during your life or after your death. It can afford some liability protection to its assets.

Irrevocable trusts can avoid probate and provide income and estate tax advantages.Unlike a will, it’s a private document and can’t be inspected by the public.

It goes in to effect immediately, unlike testamentary trusts, which are only activated after death.

Property can be added or subtracted any time.

It’s not under the supervision of any court, unlike testamentary trusts.

Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent or a Trust Attorney. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area. Award winning Realtors and Re/MAX top producers, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Listings.

Dangers of Joint Ownership by Joe Szabo, Scottsdale Real Estate Team

March 18, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

Joint tenancy is the most frequent form of ownership of stocks, bonds, real estate, and bank accounts in the U.S. Many financial advisors recommend joint tenancy because it avoids probate.

There are times when joint ownership may be appropriate. For instance, an adult child may hold joint ownership of an aging parent’s checking account to assist him or her in paying bills.

Joint ownership also presents more potential trouble than any other legal status in estate planning, however. Most people don’t realize that joint ownership almost always supersedes the stipulations of a will.

Improper use of joint ownership can result in the following:

Make the jointly held assets vulnerable to suits and judgments against any one of the joint owners.

Make it much easier for any one of the joint owners to take all the jointly held assets without permission of the other joint owners.

Make a will legally ineffective.

Increase estate taxes at the death of the surviving joint owner.

Review all the assets you currently hold in joint tenancy. If you sense that any of them may present a potential problem, consider changing joint tenancy to another form of ownership, such as individual ownership, trust, or limited partnership.

Tax Benefits of Home Ownership by Joe Szabo, Scottsdale Real Estate Team

March 14, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

If you’ve lived in your home for two years, you can take a tax-free gain of $250K for a single filer and $500K for married (filing jointly). You just have to have used the property as your principal residence for two of the past five years. You can even rent your house out for most of that period and still qualify for the full gain!

If you’ve lived in your home for less than two years, you can still take a “reduced exclusion amount” (pro-rated from the full amount according to how long you’ve lived there) if you’re “forced” to move because of “unforeseen circumstances” – which can simply mean that you’ve started (or ended) a home-based business.

If you’ve lived in your home more than two years, you can always re-finance it to remove the value. If the current market interest rates are higher than your existing loan, for instance, get a home equity loan instead. Once your gain approaches $250K if you’re single (or $500K if married), it’s time to move.

If you decide to rent out a room in your house, you’ve created a home business from which you can deduct relevant expenses against the rental income, as well as the depreciation of the space. And when you sell the house, you can exclude the gain on the pro-rated portion.

If your income grows so high that you begin to lose itemized deductions, you can always move the mortgage interest deduction off Schedule A by using the home office deduction, which allows you to deduct a pro-rated portion of the mortgage interest and property tax on a separate schedule.

If you wish to take out a home equity loan that’s fully deductible, simply demonstrate that the additional debt above the amount allowable was used for business or investment purposes – such as buying in to an apartment building.

How Much Can I Spend on a House by Joe Szabo, Scottsdale Real Estate Team

March 11, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

You dream about owning a home and you think you know how much you want to spend, but this isn’t just buying new clothes and wondering if you can afford it. This is an investment, and a long-term monthly commitment. Many people who rent consider what they pay for their apartment as what they can afford. Actually with the tax benefits that accompany owning a home a person can typically afford about 25% to 33% more than their rent.

In speaking to a real estate professional like Joe Szabo and the Scottsdale Real Estate Team, they can help you figure out how much you can spend on your home and introduce you to a mortgage expert who can tell you exactly how much you can afford.

Other tax benefits are being able to write off any points charged as part of originating your loan (a point is 1% of the purchase price) as well as many other fee associated with closing.

Other items to consider are any long-term debts you may have and your overall lifestyle. Do you like to take a couple of big trips a year? Do you have a gym membership or like to lease an expensive car? A lender is going to approve you for the maximum amount you can afford. It doesn’t mean you have to buy a home in that price range. Many homebuyers prefer to purchase a home they will comfortable in and not have any trouble making the monthly payments while maintaining their personal

The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area. Award winning Realtors and Re/MAX top producers, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale, Arizona.

Easy Care Desert Landscapes by Joe Szabo, Scottsdale Real Estate Team

March 7, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

When landscapes are unkempt, straggly or overgrown, the homeowner and the guests are often uncomfortable. Most certainly the neighbors are. Patio furniture, pools and artificial lawns appear less than romantic when covered with sand or dust.

Wonderful

One way to keep up with the maintenance is to plan and install a garden that is easy to take care of, has automatic irrigation, large areas of paving, concrete or stone and has tough desert plants that look good all year round. If you love to water, love the dramatic change of plants during the seasons and have an excellent green thumb, then a low maintenance desert garden or yard is not for you.

It is helpful when planning a yard or garden to make a list of what you love to do and what is a boring chore for you. The exercise is to help you create a garden that enhances the things you love to do while minimizing those tasks you hate – whether they be watering, pruning, trimming, raking or sweeping. Plants that are well suited to your climate and excelling soil are two conditions that essentially need to be met to get your garden or yard off to a good start. This can be a challenge for homeowners when moving from a seasonal northern climate to a desert landscape.

Mulching and choosing drought tolerant plants are one was to reduce the need for weeding and watering. If you don’t like sweeping or raking, then chose carefully the plants and avoid those who drop leaves, flowers, fruits, nuts and seeds. This can also keep gardener costs down.

Unless you can easily pay for a service or enjoy pruning and cutting, choose plants that are slow growing and will not overgrow the space you have allocated to them. This is vitally important near walkways, doorway and entryways. Another helpful tip is to group plants with similar needs. Assign an area of water loving plants and fill the rest with drought tolerant species. Allocate space for those plants that grow abundantly and thus reduce the need for pruning or cutting back. A careful plan of your garden and yard at the beginning can lead to many wonderful and carefree years of enjoyment in the future.

Creating Family Friendly Back Yards by Joe Szabo, Scottsdale Real Estate Team

March 4, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

Family centered back yards and gardens have big shoes to fill! They need to be friendly, safe, and able to withstand the family dog, the trample of shows and the occasional football or soccer ball. Landscapes need to take into consideration the full range of activities outdoor in order to keep up with the needs of a busy family. This can be a big challenge in a desert landscape where the careful use of stone, succulents and prickly plants make it difficult for child play.

Anything and everything should be considered when planning a family friendly yard. Swimming pools, spas, sport’s courts, built-in bar-be-ques, fire pits, gazebos, children’s play areas, slides, tennis courts, saunas, fruit and vegetable gardens, flower beds all need to be considered.

In the 1950s, there was a boom of suburban neighborhoods which set off a crazy of creating an outdoor environment to be used by the whole family and their friends. Homeowners began to experiment with the use of plants, fences, arbors and other devices to control sun, wind, rain and snow that all impede the enjoyment of the outside. Privacy and the creation of through the use of plantings and structures have also become popular.

When planning a family centered back yard, make a list of all possible activities that your family enjoys.

Make a second list of conditions that need to be considered: cost, space, shade. Locate areas designed for outdoor cooking and eating close to the house. From your house, look out the available window to help you select appropriate play areas for children that are easily viewed from a kitchen or living room if possible.

Simple is sometimes better with a large family full of activity and pets. A large green lawn is a perfect canvas for many types of play and can stand up to some pretty tough use especially with the artificial green lawns that are an investment that pays off for years to come.