Should You Buy Your Kid a House?

Low interest rates and a depressed real estate market have some affluent parents asking financial advisers if buying their children a house could accomplish a one-two punch of moving assets out of their estate while grabbing a good deal on property.

The answer is, not exactly.

While parents may get a bargain on real estate, purchasing a home for children may not get them the best bang for their estate-planning buck, particularly if that estate is sizable and includes income-producing assets like securities or a private business interest.

As the federal tax law currently stands, a married couple can give, during their lifetimes or leave to their heirs at death, $2 million before any tax is owed. "A home isn't an income-producing asset, so it makes more sense to save the $2 million lifetime gift exclusion for other estate-planning techniques which can generate a lot more upside in the future," said Mark Luscombe, principal tax analyst with Wolters Kluwer, a business that provides tax and legal information.

Instead, advisers say parents intent on helping their children become homeowners consider a cash gift instead.

Individuals are allowed to gift up to $13,000 per person in a given year without dipping into their lifetime gift tax exclusion. That means a couple could give their daughter and her husband $52,000 a year to go toward mortgage payments or the down payment, while removing some assets out of their estate each year. In this situation, the kids would have to buy the home, but would get another break this year: Qualified first-time home buyers who purchase a home before Dec. 1st are eligible for an $8,000 tax credit. This may apply for parents and children who buy the house jointly, although the credit begins phasing out at a modified adjusted gross income of $150,000 when married and filing jointly.

There are other options, like making the kids a loan.

The government sets minimum rates for loans, among family members and others, to not be considered gifts. Those rates now are historically low, ranging from less than 1% to about 4 1/2% depending on the loan term. This method doesn't actually move money out of the estate, thus freeing up the $2 million exclusion to pass on other assets that are more likely to appreciate over time. Children can use income generated from the appreciated assets to pay off the loan. Parents could use the $52,000 annual gift exclusion for their daughter and husband to forgive both the interest and principal of the debt if they choose.

Summertime Grilling Tips

Whether you want to barbeque or grill, these little golden rules for healthy eating and grill safety apply either way:

• Before using wooden skewers, soak them in water for at least 20 minutes before grilling. This prevents them from burning.
• Keep a shaker of seasoning next to your grill. Don't forget to season your grilled food well to create flavorful meals.
• Choose long-handled cooking tools to avoid burns and splatters. A basic grill kit should include long tongs for turning the foods, a stiff-wire brush for cleaning the grill, a mop brush for saucing foods, a large offset spatula for moving delicate items, and a pair of elbow-length grill gloves for protection. Apron, optional.

In addition, you should follow these tips for keeping your grilled food healthy:

• Trim the fat.
• Choose lean meats to grill. Less fat means less dripping down into the flames, which cuts down on flare-ups. Remove the skin from poultry.
• Grill veggies. Try marinated vegetables on a skewer, on the grilling tray or wrapped in foil. Grilled fruit also makes a sweet, healthful dessert.
• Wrap it up. Cooking in foil seals in juices so you can cook leaner cuts until they are both tender and done. Wrap fish with vegetables and a little low-fat marinade for an easy meal, all in one packet.

Enjoy the summer, and happy grilling!

Real Estate News - July 2009

Our July 2009 Newsletter is now online for you…

From the right Nav Menu, Find "PAGES AND NEWSLETTERS" and Select "July 2009 below "Our Monthly Newsletters".

Death of the Mortgage Broker?

If you're in the market for a mortgage these days, one thing to be aware of that is a growing trend these days, and that is: Many banks are cutting out mortgage brokers altogether.  This video explains: (Runs 1:34)

If you need or want to find a mortgage broker, contact us. We'll be glad to help you locate a broker to assist you with your next mortgage.

Homeowner Insurance: What's Covered?

The fastest way to learn what’s covered by your homeowner insurance is by reading the declarations page of your policy. What’s below is a rough guide to typical policies.

What's covered under a typical homeowners policy:

Your home and any detached structures on the property.

Most furniture, appliances, electronics and tools.

Liability and medical expenses for injuries and property damage for which you are responsible, up to your policy limits.

Limited living expenses if you are forced to vacate your home because of a loss.

 
What may not be covered:

The replacement cost of your home and personal property, vs. its actual cash value.

Jewelry, collectibles, firearms and other expensive items in excess of certain limits, typically $1,000 to $2,500.

Business equipment, including computers used for work, in excess of certain limits, typically $2,500.

Sewer or drain backups.

Liability coverage for pools, trampolines and other high-risk items.

Mold.

 
What's not covered:

Cracks or settling in the foundation.

Neglect, wear and tear or intentional damage.

Flood or earthquake damage. Coverage for either is available separately.

Landslide or other earth movement.

War or nuclear explosion.

Pest damage.

Pet damage.

 
10 discounts to ask for:

Multi-policy (home, car or more with the same company).

Smoke detectors.

Fire extinguishers and sprinkler systems.

Burglar and fire alarms that ring at an outside service.

Deadbolt locks and fire-safe window grates.

55 years old and retired.

Longtime policyholder.

Upgrades to plumbing, heating and electrical systems.

Earthquake retrofitting.

Wind-resistant shutters.

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