Using intrafamily loans in your estate plan

Interest rates are still at historic lows, despite an expected Federal Reserve rate hike. At times like these, families have a unique opportunity to transfer wealth via an intrafamily loan. An intrafamily loan is a way for family members to loan money to each other at a special rate. They might be used to help a relative buy a house or finance a startup, for example. But for some families, they’re a tool to transfer assets outside the lifetime gift tax exemption. When making an intrafamily loan, interest rates are typically lower than those from commercial lenders. However, the IRS…..

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How you can end up in Medicare’s ‘doughnut hole’

Medicare prescription drug (Part D) plans can have a coverage gap — called the “doughnut hole”— which limits how much Medicare will pay for your drugs until you pay a certain amount out of pocket. Although the gap has gotten much smaller since Medicare Part D was introduced in 2006, there still may be a difference in what you pay during your initial coverage compared to what you might pay while caught in the coverage gap. When you first sign up for a Medicare prescription drug plan, you will have to pay a deductible, which can’t be more than $445 (in…..

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Social Security benefits for spouses and ex-spouses

A little-known feature of the Social Security system is that in addition to paying benefits for a retired worker, it may provide benefits to the worker’s spouse, an ex-spouse if the marriage lasted at least 10 years, and dependent children and grandchildren, depending on the circumstances. Here is a general description of the benefits for spouses and ex-spouses. Your spouse is entitled to an amount equal to one-half of your full primary insurance amount (PIA). In order to receive this benefit, your spouse must be at least 62 years of age or caring for your child, who is entitled to…..

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The dangers of using an online power of attorney form

A recent Pennsylvania case involving a power of attorney demonstrates the problem with using online estate planning forms instead of hiring an attorney who can make sure your documents are tailored to your needs. Mercedes Goosley owned a home in Pennsylvania. In 2013, she named one of her six children, Joseph, as her agent under a power of attorney using a boilerplate form that Joseph downloaded from the internet. Unbeknownst to Joseph, the power of attorney required Mercedes to be declared incompetent for Joseph to act as her agent. Powers of attorney can be either “immediate” or “springing.” An immediate…..

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Using trusts in Medicaid planning

With careful planning, you may be able to preserve some of your estate for your children or other heirs while meeting Medicaid’s low asset limit. The problem with transferring assets is that you have given them away. You no longer control them, and even a trusted child or other relative may lose them. A safer approach is to put them in an irrevocable trust. A trust is a legal entity under which one person — the “trustee” — holds legal title to property for the benefit of others — the “beneficiaries.” The trustee must follow the rules provided in the trust instrument. Whether…..

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Smaller landlords might gain from state marijuana laws

It’s possible that small landlords will receive an unexpected benefit in states with laws that legalize recreational marijuana. That’s because properties with loans or mortgages from federally chartered banks are prohibited from renting to marijuana dispensaries due to the ban on marijuana production, sale and use under federal law. However, small landlords who own their properties outright or work exclusively with local, state-chartered banks will be able to rent to these businesses. Overall, small landlords have fewer internal and external regulations to manage. They also stand to make good money off these deals because dispensaries tend to pay market or…..

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Key tax questions to consider before moving

If you’re thinking of relocating, consider the following questions before you leave your current home: Q. Will I save money if I move to a different state? A. The short answer is: It depends. You’ll need to work through comparisons of all sorts of numbers, including state and local income taxes, sales taxes, state level estate or inheritance taxes and real property taxes. You also need to consider the cost of living and travel to family or your old location. Tax rules differ by state, sometimes in very small but meaningful ways. Q. Do I pay income tax in both…..

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New rules protect mortgage borrowers

With the goal of preventing a sudden rise in foreclosures as federal bans are phased out, the Consumer Financial Protection Bureau has amended the federal mortgage servicing regulations. The new rules create temporary safeguards to give borrowers time before foreclosure to explore their options, such as selling their homes or loan modifications. The rules apply to loans on principal residences, but generally do not apply to small servicers. They went into effect on Aug. 31. “As the nation shifts from the COVID-19 emergency to the economic recovery, we cannot be complacent about the dangers we still face,” CFPB Acting Director…..

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Smaller property investors might be affected by Biden’s real estate tax plan

Real estate investors would experience a tax hike under President Joe Biden’s plan to help fund the $1.8 trillion American Families Plan. The American Families Plan allocates funds for childcare, paid family leave and education programs. The tax hike would happen because Biden’s plan removes a real estate investor’s right to defer taxes on property gains over $500,000. If this plan goes into effect, it will likely impact smaller property investors. The plan would put a stop to a strategy known as like-kind or 1031 exchanges — named for Section 1031 under the Internal Revenue Code — which allows investors…..

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Bill would give donor-advised funds charity deadlines

A bill introduced in the Senate would have the effect of moving more money out of donor-advised funds and private foundations and into working charities. For donor-advised funds, the bill, called the Accelerating Charitable Efforts Act or ACE Act, would establish deadlines for distributing money to charities. It would also tighten certain regulations for private foundations. Under current law, donor-advised funds do not have a minimum payout rate. These charitable accounts are created and funded by individuals to distribute to charities in the future. Donor-advised fund account holders receive a tax deduction when they put money into the fund. Opponents…..

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