The Economy
Why Use Trusts?
Friday, January 9th, 2009 | Investment, Money, Real Estate, The Economy | No Comments
Estate Planning – Bypassing Probate
1. Assets held in trust are not part of an individual’s estate; therefore, those assets would not be included in probate because they are already held in trust for the benefit of another individual. If a beneficiary dies, the beneficial interest in a trust may be part of their estate; however, this would not affect the asset or the trust, unless dictated by the Declaration of Trust and Trust Agreement.
2. The best example if this is Anna Nicole Smith. This was the 20-Something model that married the 90-Something Texas oil billionaire. The billionaire left Smith several million dollars and his children contested his Will. Although the Will was modified several years prior to his death, the children contested on the grounds that the billionaire was not competent to make the change. The children said the Will was not valid and a judge agreed and entered a different judgment.
a. The Billionaire’s wishes were not honored
b. He was found incompetent after his death
c. The children were granted the majority of the estate
There are several version of what “really” happened … either way, if these assets had been placed in Trust for Smith, they would not have been part of the Billionaire’s estate and very difficult to contest. The title to any such assets would be held in trust and a Trustee would have ultimately made the decision as to the disposition of them; in accordance with the Billionaire’s wishes.
3. Probate is the publicizing of an individual’s Last Will and Testament. A Probate judge makes the Will a matter of public record in order to determine if there are any outstanding debts which should be settled prior to the disposition of the assets. In other words the Court says this; “Hey, this guy has assets. Is there anyone who has reason why this Will should not be recorded? Does this person owe you any money? Is there anyone who’d like to screw this guy?” If no one comes forward, the judge allows the heirs to have the proceeds of the Will.
4. Since assets held in trust are not part of anyone’s estate, these assets bypass probate and continue to be held in trust for the benefit of another person. The trust can hold these assets for up to 20 years, as directed by the Grantor or creator of the trust. After 20 years, a new trust would have to be created or the assets liquidated.
Privacy – Avoiding Becoming a Target
1. Since trusts are private documents created by individuals they may be kept from public view. In fact, most trust documents forbid anyone from disclosing the documents to a third party or anyone who is not a party to the trust; Trustee, Director, Beneficiary, Etc. Disclosing the documents would be a breach of contract and any disclosing party would be liable for damages.
2. The assets of a trust are likewise, private and may not be disclosed to anyone outside the trust. The members of the trust are the only individuals who know what assets the trust holds. Land, vehicles, ATVs and other items which have a “Title” can become part of the public record; however, only the “Owner” or “Title Holder” may be made public. If a Trust holds title to an asset, the name of the Trust is public, but the Declaration of Trust, the Trust Agreement, any Beneficiaries and other information about the Trust remains part of the private agreement.
3. If an individual is sued and they don’t “own” anything, it will be difficult for liability to attach to an asset. Trusts are not “Owned” by anyone. Trusts have Trustees who handle the legal affairs of the trust and its assets (Trusts can’t be liable for the actions of a Trustee). Trusts have Directors who tell the Trustee what actions to take with regard to Trust assets (Trusts are not liable for the actions of the Directors). Trusts have Beneficiaries who may have the right to receive proceeds, avails, dividends and other funds produced by the assets; however, Beneficiaries to NOT have any ownership in the asset of the Trust (Therefore, Trusts may not be held liable for the actions of a Beneficiary).
4. As beneficiary, an individual may “control” an asset without the liability of ownership. The fact that an individual is a beneficiary is private and their interest in the trust is private. An individual may control hundreds or properties without appearing on title.
Asset Protection – Avoiding Liability
1. Private Jet Crash with Signer
a. To be completed
2. Victoria A. – Lost properties due to fire at property
a. To be completed
3. John R. – Charlotte, NC
a. Imagine you leave for the weekend and a well-deserved vacation. When you return, through no fault of your own, you are embroiled in what you think is a baseless lawsuit? You have insurance, right? Of course you do. The problem is your insurance doesn’t cover All Terrain Vehicles and that is what your neighbor borrowed while you were out of town.
John R. is a Realtor and investor from Charlotte, NC. Last year John became the victim of our litigious society and is realizing the difficulties faced by someone with large assets. John carries a large “Umbrella Insurance Policy” in hopes that no judgment will exceed $5 Million. He’s covered at home, work, the car and everywhere he travels. His home is covered. His rental properties are covered; however, his 4WD ATV is expressly NOT covered by his liability policy and that is what his neighbor was riding when he struck a tree and was paralyzed from the waist down.
John left for Myrtle Beach, SC on Friday May 26, 2006. The neighbor, and friend, agreed to watch the house and feed the dogs. John agreed to let the neighbor and his son borrow his ATV. The neighbor had used the ATV on several other occasions and was an experienced rider; however, at some point on Saturday the neighbor was riding with his son and struck a tree. The neighbor’s son was knocked unconscious and the neighbor broke his spinal cord and became paralyzed from the waist down.
When the family returned from the beach, they were informed on the accident (which didn’t even occur on John’s property) and John visited his friend in the hospital. Within a few weeks an attorney filed suit against John for negligence in the maintenance of his ATV. The suit stated that the neighbor was an experienced rider and would not have struck the tree if the ATV was properly maintained (the ATV was a Christmas present 5 months prior).
John’s insurance company immediately informed him of the clause which specifically excluded motorcycles, scooters, 4-wheelers and ATVs or any kind.
It has taken almost 18 months to reach a conclusion and John has liens against the equity in all his investment property, stocks and other assets, which are owned by him and his wife. The neighbor has begun proceedings to seize the property in order to satisfy the judgments. Not only has John lost the equity of his real estate, he has spent more than $125,000 defending the case.
The bright spot is that John’s personal residence is held in a Land Trust for his children. The family’s home is owned free and clear with no mortgages or liabilities and is the family’s most valuable single asset. The liability of the judgment has not attached to the home. Since the home is held in trust for the benefit is their children, it is no longer titled to John and his wife and may not be seized to satisfy any judgments.
John and I spoke at several REIA meetings over the past few years about the need for him to place the rest of his property in trust. This could have significantly impacted the neighbor’s ability to receive any satisfaction to the judgment, while John could have maintained control and tax benefit from the mortgages on the properties.
Greg@WeBuyHouses.ME
We Buy Houses Internet Trust
Asset Investment Trust
112 S. Main St
Clover, SC 29710
877-567-2513 (Ext 101)
Let’s hope!
Saturday, December 27th, 2008 | Money, The Economy | No Comments
For all of you who are worried about the economy, I have decided to review a little history of the US.
From 1890 and 1930 there were four major economic downturns. Of these downturns only one made the name of the “Great Depression!” It started shortly after the stock market crash of 1929 and lasted for more than ten years. Unemployment well into the downturn reached 30%. We are at 6.7% unemployment. This figure may not be calculated the same as in the 30s, but it is pretty easy to see that we don’t have one in three workers without a job.
Looking at the history between 1890 and 1940, what was the big difference between the earlier crashes and lasted about 3 years each and the “Great Depression?” By far and away the biggest difference was the United States government. They tried to fix the problem with the wrong solutions, convinced the public to stay the course, and created misery. The only way we finally got out of the quagmire was WWII. We shipped millions of men both East and West and increased manufacturing of weapons.
Let’s hope that our government entities at all levels refrain from repeating the past failures. WHO knows?
Here we go again.
Tuesday, September 23rd, 2008 | Investment, Money, Real Estate, The Economy | No Comments
As Congress sits around throwing accusations, people are being hurt. The only thing that I see that could be worse is that Congress does something about the economy. I was watching our Phoenix market begin the turn around. Sales were increasing, inventories were beginning to decline and BOOM! The rug gets pulled out from the buyer’s plans with the dramatic changes in seller participation.
The lower priced properties are the most important sector of the housing market. Putting people in properties with monthly payments at or below rent payments is a winning program. The average rent in Phoenix is over $800 per month. Moving into a $100,000 home makes both social and economical sense. But NO! These folks must have at least $3,500 additional money sitting in the bank for 90 days or borrowing only from family members. Remember, there are significant costs involved with moving in.
This change is only putting a band-aid where there is no cut. The band-aid is cutting off economic blood flow to the real estate market body. Of course Congress could do much more to really trash the economy. There were four significant economic downturns between 1890 – 1929. The downturns rebounded quickly and the country was stronger. In the early 1930s, Congress did the opposite of what should have been done, And the whole world felt the pain. We could still be in that depression if we hadn’t put our men to work on the battlefield. War is definitely the worst way to manage economic down turns.
Let’s put the seller and other assistance programs back in our real estate market.
The short sale is anything but short!
Wednesday, September 17th, 2008 | Money, Real Estate, The Economy | No Comments
The news is reporting home values have declined by 27%. This number changes from month to month, but regardless of the percentage, in almost every neighborhood, Home values are below the high spike of 2006. For you who expect to live in your homes for at least five more years, this housing price fluctuation has very little to do with your life. For those who want to purchase a home, it is almost like after Christmas shopping. Unfortunately many folks who must sell their homes are SOL. Many of these folks have mortgages that are higher than the present value of the home. One way out while avoiding foreclosure is a “Short-Sale’”
I have really been discouraged with the short sale process. (Selling a home below the mortgage value) It seems like lenders are unwilling to do what is necessary to get a sale done. Many banks seem to think it a privilege to buy their vacant home and expect a buyer to wait for months for a decision. I can’t remember any of my real estate associates ever describing an easy short sale. Many short sales take months to complete with special bank generated forms and endless attempts to contact a decision maker. It is not uncommon for me to send 5 copies of personal information in a purchase contract to a bank fax or email before the banks admit they received one contract. What are these folks doing with all this personal information? And after doing 5 – 10 times the work of a normal sale, the bank expects me to cut my commissions.
The people hurt the most are never considered during all this ineptitude. A seller is not considered. Now everyone seems to think the seller just shouldn’t have purchased the property. The bankers are the real experts. They have whole departments with educated staff to evaluation properties on a professional level. The seller, it seems to me, trusted the lender to some extent. Now, he is upside down, looking at having to carry FORECLOSURE on his record. I would have expected that the lender and seller would try to partnership to minimize the loss to both. Unfortunately, it appears that redundant processes and understaffed departments slow the sale process which creates more loss for everyone.
While a file is gathering dust on a desk, the home owner’s life becomes uncertain. Some of these folks live in this home and don’t know when they can leave. Some are investors (considered a dirty word by the politically correct) who are watching their entire life savings dwindle away with an upside down situation.
The buyers are no better off. Imagine if you are trying to purchase your first home. You have a lease that ends in 45 days. What are you supposed to do? Sit on the street with all your posession until someone finally decides to look at your offer?
Only a banker, a government bureaucrat, or someone in Congress could design a system this bad!
2 million troubled borrowers avoid foreclosure
Friday, August 29th, 2008 | Money, Real Estate, The Economy | No Comments
Phil found another interesting article at CNN Money.com
The Hope Now coalition reports that it completed a record number of mortgage workouts in July – but that was outpaced by the increasing rate of foreclosures.By Les Christie, CNNMoney.com staff writer
Last Updated: August 27, 2008: 2:40 PM EDT.My Intro
NEW YORK (CNNMoney.com) — Hope Now has helped more than 2 million at-risk borrowers stay in their homes during the past 13 months, according to numbers released by the coalition on Wednesday. The alliance of mortgage servicers, counselors, and investors assembled to combat foreclosures fixed more than 192,000 problem loans during July, a one-month record that represents a 6% increase over June.
http://money.cnn.com/2008/08/26/real_estate/Hope_now_hits_two_million/index.htm?postversion=2008082714
Some Buy a New Home to Bail on the Old
Thursday, June 12th, 2008 | Money, Real Estate, The Economy | No Comments
Phil send me this aarticle with the note that this has got to stop and I agree whole heartedly. The price of homes changes with the market. This is very short sighted!
Fannie Plans Rules To Avoid Practice Described as Fraud
By NICK TIMIRAOS
June 11, 2008; Page A3
Next month, Michelle Augustine plans to walk away from her four-bedroom house in a Sacramento, Calif., subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby.
Here is a great place for great financial information
Friday, May 16th, 2008 | Investment, Money, Real Estate, Safety, Statistics, The Economy | No Comments
If you have read some of my earlier posts you probably asked yourself where do I get some of the data I use. As an example, the statistics in the article “Why haven’t your mutual funds made you rich.” I found on the net. I gave Crestmont their credit and even linked their web site on this post.
I was back there again today and was amazed at some of the great stuff these folks have compiled. Using their information and by adding in costs and inflation, I came up with the realization that the money I put in mutual funds in 1997 has generated NO wealth for me in more than ten years!
I admit that some of the information at their site is a little deep. But they have some great graphs that help a lot. One place I looked today was the volatility of the market and another great chart was “Interest rates and inflation.” Now that was an eye opener!
Most of us think we are so busy that we don’t have time to do any research. We don’t pay any real attention to our IRA or 401k. We think that the professionals are doing a better job than we can. We just glance at the numbers when we get in our quarterly report. Most of us don’t know where to start even if we were interested. That is one of the reasons I have this blog. If I find something I want to share it.
While you are watching “Dancing with the stars,” go to Crestmont – http://www.crestmontresearch.com/ and have a look around during the commercials. As an older person I want to make sure I put my money where it is safe and work HARD for ME!
Cheryl moved her retirement funds into cash last November. She is just getting back into mutual funds and missed a 25% drop in the value of her nest egg. The real estate market has some exciting places where I can meet and exceed my financial needs. I feel this is the most exciting time to invest in the last 30 years. “Buy low sell high!”
Home-price data has its flaws
Thursday, May 8th, 2008 | Money, Real Estate, Statistics, The Economy | No Comments
Phil found another gem of an article on the news you hear and see every day!
Top officials with the National Association of Realtors and Standard & Poor’s, which issues the S&P/Case-Shiller Home Price Index, agreed this week their monthly reports are giving imprecise readings of price changes at all levels — national, state and regional — due to rare market conditions that are skewing survey results.
Why the worst may be over
Wednesday, April 30th, 2008 | Money, Real Estate, The Economy | No Comments
The credit crunch may be behind us and earnings have been better than expected. That could lead to happier times if the Fed starts focusing on inflation.
Oil hit another record high but has since pulled back. The dollar has finally started to show some signs of life. And for the most part, corporate earnings were – as Larry David would say – pretty pretty good.
Sunny side of the street
Tuesday, April 22nd, 2008 | Investment, Money, Real Estate, The Economy | 1 Comment
Seventy-seven percent of the wealthiest people surveyed think real estate presents a “real opportunity” right now. In the survey, “wealthy” meant having discretionary household income of more than $500,000 a year.
And these high-income earners are putting their money where their mouths are:
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