Your Money: Pros and cons of reverse mortgage vs. home equity line of credit

Is a reverse mortgage right for you? Vested Land Services can help.

Karin Price Mueller writes a great column for the Star-Ledger where folks get to ask a finance or business related question.  One that intrigued me this week was this:

Q. I don’t get it. When people own their home, wouldn’t it be more advisable to get a home equity line of credit or loan than a reverse mortgage? At least a HELOC is low interest (right now) and tax deductible! If anything happens to the owner — death, bankruptcy — the funds are deducted from the sale of the house. Right?

— Curious

It's a good question because a lot of mystery surrounds reverse mortgages.  Frankly, they are not for everyone.

Here's part of the reply to Curious:

The major difference between a reverse mortgage and a home equity loan or line is that with a reverse mortgage, no payments are made by the homeowner while the homeowner remains in the home, said Howard Hook, a certified financial planner and certified public accountant with EKS Assoc. in Princeton.

Compare that to home equity loans, which are typically are amortized over a period of time whereby principal and interest is paid by the homeowner, he said. A HELOC requires interest to be paid for a period of time, and then at some point, both the principal and interest will be amortized.

I recommend you read the full column here.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Avoid probate yes, but taxes no. Living trusts work for some.

Every so often, we in the title industry get to see that someone has bought a book that attempts to teach the reader how to avoid probate. The idea behind these books is that the person who follows the plan will not only not have to have an estate administration but can avoid estate taxes, too.

So we were pleased to see that Karin Price Mueller writing for the Biz Brain in The Star-Ledger, answered the following question:

“What are the benefits to having a living trust fund compared to a regular will?”

“Living trusts, also called revocable trusts or revocable living trusts, are sometimes touted as an absolute essential.”

“While the person who set up the living trust is still alive, there are advantages for those who will help manage that person’s affairs if they’re unable to.”

But living trusts are not fool proof and must be done with the assistance of an attorney. Rely on a do-it-yourself book and you’ll get burned.

Read the full article here.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Death and taxes in New Jersey

The Star Ledger’s Karin Price Mueller writes,

“Sure, the thought of dying doesn’t bring a smile or a happy dance to most. But dying and being taxed, even after you’re dead?

“Welcome to New Jersey.

“While there have been many changes to estate tax law through the years, often benefitting the so-called rich, New Jersey, as usual, rocks to its own drummer. It’s a politically charged issue, but let’s face it: Dead people can’t vote. And the state isn’t likely to give up easy revenue anytime soon.

“So don’t die in New Jersey — or at least don’t die in New Jersey without a comprehensive estate plan.”

What kind of death taxes are there? Federal and state.

“The federal estate tax exemption increased over the past decade, meaning you were able to leave more money free of federal tax as the exemption went up each year. For 2010, the tax was completely repealed, making this year a great year to die, at least federally speaking. If there’s no action in Washington for 2011, a $1 million exemption will be resurrected.

“Congress keeps dallying around the issue, so the future of the federal estate tax remains, for now, in limbo. New Jersey’s estate tax, by comparison, is pretty solid.”

While some states tied their estate taxes to the federal, New Jersey didn’t. Thus, the exemption in New Jersey has been $675,000 since 2001.

“That may sound like a lot of moola, but it’s not hard to die in New Jersey with that much in assets. Lots of state residents reach the $675,000 threshold in real estate alone. Throw in a 401(k) and a bank account or two, and you’re there. Even if you don’t have enough to owe federal estate tax, you very well may owe the tax to New Jersey.

“Here’s an example: Let’s say you die with an estate worth $950,000 in 2010 or 2011. You won’t owe any federal estate tax. But anything over $675,000 — in this case, $275,000 — would face the New Jersey estate tax. That comes to a bill of $31,800. If you instead died in a state with no state estate tax, your estate would owe nothing at all.”

Ouch, so what to do?

Ms. Price Mueller mentions a few options. Find out what they are by reading the full article.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Selling a vacation home? Tax treatment of furniture can catch you.

Karin Price-Mueller, the BizBrain at the Star-Ledger, fields questions from readers on a variety of matters. Here's one regarding tax treatment of furniture when selling a furnished home. (The question is shown in full.)

Q. When selling a furnished vacation home, can I add to my original basis the replacement costs of the furniture and accessories that came with my condo and that I have replaced over the years, such as TVs, rugs, couches, chairs, drapes and air conditioners? The condo unit was originally purchased for $80,000 plus a $5,000 furniture package, and we sold it furnished for $250,000. While I rented it out at times, I didn’t depreciate it. It was primarily a vacation home.

— Bob

"A. Even though you bought the home furnished all those years ago, you can’t include the furniture as part of your cost basis."

Essentially, you can only add improvements to the cost basis of the home, not furniture.

"Some examples of capital improvements that would qualify as an increase in cost basis include the cost of putting an addition on the home, replacing the whole roof, installing central air-conditioning, paving the driveway or rewiring the home."

"Adding the furniture to the cost basis is only asking for trouble, said Douglas Duerr, a certified financial planner and certified public accountant with U.S. Financial Advisors in Montville. "

Read the full article Furniture sold with home does not count toward cost basis.

And, as always, we recommend you speak to your tax advisor when undertaking any major financial transaction.

For your next title order or
if you have questions about what you see here,
contact Stephen M. Flatow
Vested Title Inc.
648 Newark Avenue, P.O. Box 6453,
Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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