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Investing for the Future

5 Feb

As I was watching Friends recently, I learned what Ross Geller would do, if in fact, he won the lottery. Obviously, the comedic elements don’t necessitate an actual answer, but the reality is investing is an important part of life. I’ve previously stated that investment is important. As a real estate professional, I am incredibly biased, but I believe real estate is a tremendous place to invest one’s money.

Investing one’s money is such a complicated subject that there is no way I could get into every nuance, even if I knew them all. While it can be used to increase one’s current standard of living, I will address the concept of investing for one’s retirement. While I believe it is possible (and even common) for one to idolize the concept of retiring, it is a worthwhile venture to plan for when working, as much and as often as you currently do, is (or almost is) impossible. The government has allowed several different ways to invest for retirement with tax benefits, including an IRA and a Roth IRA.

My primary thought is that most people do not know how to invest this retirement money in anything other than stocks. Stocks can be a fantastic investment and one of the pastors at my church, Mike Graham, can tell you how if his grandparents had listened to his 12 year old brother, they would be the richest family in the USA. Obviously, a tremendous amount of wealth can be gained by investing properly in stocks. I guess my main beef is that I have an MBA, feel like I understand relatively well how stocks work, and I can’t name a single stock that I can (with any accuracy) predict what it will do in the future. This may be the primary way I display my ignorance, but it is where I live.

I believe the most under-used investment tool for IRA’s in investing in real estate. So you ask, “Can my IRA really invest in real estate?” The answer is USUALLY Yes! I say underused, because I believe if a 100 person survey (Family Feud Style) were taken on what is a better investment-stocks or real estate, a certain number of people would say real estate. Whatever that number is (you’ve got one in your head at this point), the answer is probably more than 1. If it is, the concept is underused, because less than 1% of the population uses its IRA money on real estate.

If you are in that portion of the population that feels real estate is the better investment, but never considered using it for your own retirement account, contact NuView and set up a self-directed IRA. Then, call or email our office, so we can guide you through the specifics of choosing good real estate investments. Then, when you retire, you can have a healthy amount in your retirement account to make it fun to do things like travel, visit grand-kids, or just give your favorite blogger nice gifts!

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Revocable vs. Irrevocable Trust

6 Nov

After learning the basics of a trust, a person typically needs to determine a variety of factors about the trust they are establishing. The one that seems to have the biggest long-term effect is whether the trust is revocable. While many of us know the definition of the word, that is not quite enough to grasp the nuances between those types of trusts.

A revocable trust, sometimes called a living trust, is almost always created for the entire purpose of allowing someone to help pass his assets outside of probate, yet allow that person to retain control of the assets during his lifetime. It is more flexible in that it can typically be dissolved at the will of the person given the authority to dissolve it. A revocable trust usually is only “revocable” during the life of the creator/grantor or whomever it names as the person holding the power to revoke the trust.

When creating such a trust, there are no legal restrictions on who is allowed to be a trustee or a beneficiary. The terms of the trust vary as commonly as trusts themselves exist. Many people try to retain complete ownership and control over the trust during their lifetime, yet there are certain risks associated with doing so, and even some lose a homestead exemption.

To an even greater degree than other trusts, consult a professional before moving your homestead to a trust ownership, because of those potential difficulties. So, when putting things in a trust, make sure the things that are desired are, in fact, the things that are accomplished. Even if one’s property is put in a revocable trust in such a way that everything post-life is accomplished, the revocable estate property is still subject to estate taxes. So, during one’s lifetime, a trust is still going to be taxed at least as much as any other entity of ownership would be.

On the other hand, an irrevocable trust typically transfers assets out of someone’s estate, but it cannot be altered by the grantor after it has been executed. While you may be able to avoid estate taxes and probate for the estate, once you establish the trust, you lose control over the assets and you cannot change any terms or decide to dissolve the trust. When putting your assets in an irrevocable trust, you are at the mercy of someone else to make sure what you want to happen, does in fact happen.

While an irrevocable trust might be preferred over a revocable trust if your primary purpose is to reduce estate taxes, a revocable trust is often preferable if you want to maintain more control over your assets. If you want to maximize the control you have, a trust might not be the most effective management tool. It’s great to take care of your estate after you go, but it is probably even more important to take care of an estate while alive! Don’t be so mindful of dying that you have to live your life in a worse way. I’ve seen people have money in a trust that they cannot touch and, therefore, be required to live a poor life.

Therefore, while putting a property in trust does in some ways remove the trust assets from your estate, it is important to know in which ways. Being relieved of tax liability on the income generated by the trust assets is nice, yet getting that money back so that you can use it yourself often does away with this benefit because the distribution does usually have income tax consequences. It may also be protected from legal action against you, which is a two pronged benefit. First, people are less likely to challenge you and second, people get less if they succeed in proving you guilty.

All other factors aside, knowing your rights to rescind or adjust the trust after creation is important when forming a trust. There is nothing more frustrating than feeling like assets, which justly seem like your own, are outside of your control to a degree where you dislike what is being done with those assets.

What Is a Trust?

15 Oct

If you were to ask me what a day is, I think you would understand that there is a context to that question. For example, there is the scientific answer of a 24-hour time period, there is the meteorological answer separating it from night, there is the philosophical answer of it being what you make it, and I’m sure there are a great number of other answers that you could have based on the conversation. Similarly, to answer the titular question, there must be context. So, the answer will almost assuredly need to be contextualized. It is similar with a trust, as they can be arranged in many ways, for many purposes, and with a myriad of different offshoots.

You can look up the definition of a trust, and get a really good answer, like Fidelity‘s definition that a trust is “a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries.” I like to think of it as something that was originally set up for parents, who had kids that they wanted to “benefit” from their wealth, but the kids were not old enough (legally or practically) to handle that wealth. So, they set up someone that was “trusted” to manage the affairs until such a time as the children were ready to take over. This is from whence we get the names beneficiary and and trustee.

The trustee is the person who controls (from a legal perspective) the asset or property, while the beneficiary is the one who gets the accumulated benefit or wealth. Why such an arrangement might be desired can range from protecting youthful exuberance from itself (or as we prefer to call it, Controlling Your Wealth or Protecting Your Legacy), Keeping your ownership or wealth secret (Privacy), or Tax Classification Savings (Probate, Bypass, Testimonial, or Charitable, to name a few). A trust can serve a variety of purposes, but the basics are always the same.

Some people believe that everything should be shoved into the infrastructure of a trust. While trusts are versatile and can handle a variety of circumstances, they certainly aren’t for everyone and they don’t make sense in every situation. There are times where another way to organize ownership or assets would be superior. To go over each of those would be impossible, but suffice it to say, there are also instances where a trust makes sense. Stay tuned next week, where we begin to differentiate between specific kinds of trusts.

Rules, Take 2

28 Sep

I don’t like rules very much. From balking at the “right” of the government to tell me how I need to take care of myself in a car or how I need to take care of my family’s medical bills to the “inane” rules about graded material in my children’s school or my ability to question said determinations as a parent, I find myself anxious to fight those that want to put themselves in authority over me. It is a difficult thing to allow someone else’s will to take priority over mine. What this says about me as a person is another discussion, but what it says about me as a someone who chose to work with laws is this discussion.

I have been known to say, Learn the rules so you know how to break them properly. Some people think of this as career admission for attorneys. I think, however, that the it would be more accurate to say, we need to know what the rules are, so that we can take maximum advantage of their repercussions. For example, there is a law in Florida that states, a driver must have “safety belt which is properly fastened at all times when a motor vehicle is in motion.” If someone were desirous to put themselves in a position of less safety, that person could possibly find a way to fasten the belt and yet not abide by the obvious spirit of such a rule.

Moving on to issues in which I like to practice, there are nuances to every real estate contact. Knowing the precision of these laws allows someone to take maximum advantage of options. This is what we attempt to do in our practice. We like to know as much as is possible about the real estate contract, that we know when different ownership interests are most advisable, when a deed is needed, when documentary stamps must be purchased, when to time the sale for different circumstances, when a contract actually exists, and a myriad of other things that may come. When we do, we can advise you with certainty and knowledge.

We have learned many nuances and permutations about laws for all forms of real estate transactions, creating and managing land trusts, writing and reviewing contracts, prioritizing and preparing wills, estate planning and management, elder law issues, and many other related issues. We advise and instruct in all of these issues. We also seek to maintain integrity, our moral compass, and Christian ethics in every thing we do. So, then, why do we need to study the rules so well, if we are attempting to stay within that which is morally correct. The short answer is that what is morally right is not synonymous with legally acceptable.

Every decision, to be sure, should be made with that which you believe is ethically acceptable, but one’s individual moral compass is not the standard the Florida legislature uses when writing laws. If there were no questions, you would not be coming to see attorneys at all. Any decision you make upon seeing an attorney is yours, they are merely the conduits who let you know the rules that exist. Many laws are value-neutral, nevertheless knowing those laws is an important step to making an informed decision.

Informed decision is the way to go. You may dislike rules as I do, but ignoring them does not make them go away. And merely doing that which you think is right is usually a recipe for inviting trouble. Ignorance may be an excuse for some things, and you may be able to be square with God for certain actions, but Florida, or any other state in the union, doesn’t allow you to use that as an excuse. Therefore, when rules come into our lives, we are required to be aware of them when we act, or we suffer the consequences. And, in certain areas, we might be the best people to talk to before making those decisions.

Do I Need to Write a Will if…

11 Sep

I recently solicited questions and there are a variety of questions about someone writing a will. Most people will answer this question with a definitive yes (or a definitive no) and even if that is the answer you think should be given, I feel it prudent to delve into the answer to this question and WHY that is the answer.

First, one must understand what a Will is. A Will is a legal document containing instructions as to what should be done with one’s money and property after one’s death. So, a will is only needed by those who plan on dying. If you are not planning on dying, you need to come to grips with your own mortality and understand that you will, in fact, one day cease to exist on this planet.

If you have no money or property, a will is also unnecessary for you. Property includes things like children (which might lead me to have a whole diatribe on baptism, dedication, and conversion, but that is a subject for another blog). If you have no money, no property, and no children, you might need to solicit our help on changing at least the first two, so that you do have money and property, but a will is only for people who have something to give away.

Furthermore, some people have a little money and property, but they really have no concern over whether their money goes anywhere specific. Now, those of you who do not care where your money goes, I will provide you with a will, which gives all of your property, after your death, to me. If you have children, you ought to concern yourself with what happens to them after your death, and you should consult many counselors in your life to determine the best course of action.

Now, let’s say that you don’t take the time to write a will, then what happens? Well, the state of Florida (or, if you are crazy enough to live elsewhere, that state or country) has one written for you. Florida’s default will gives your property to people related to you through your grandparents (i.e., no second cousins and no one added by marriage). If you take neither the time to have a will nor the time to have relatives, then the property escheats to the state.

Many will tell you that escheating is where the state cheats you out of your property. I don’t like to put it that way, because the property has to go somewhere. And until I can convince the Florida legislature to have the property escheat to me, it goes to the state. Nevertheless, that is what happens when you don’t write a will. Therefore, anyone who is going to die, has some property, and cares where that property is going to go, needs to write a will.

How Can I Lower My Mortgage Payment If…

22 Aug

Well, If I am the Phat Man, and I’m writing a blog called “Ask The Phat Man,” I might occasionally get a question that needs to be answered. So I recently solicited questions. There are a variety of circumstances that lead to someone having a mortgage payment. Almost everyone would like to lower their monthly payment, but when should you.

The first situation is someone who asks, “How, can I lower my payment if my house has dropped in value and just isn’t worth what it was when I agreed to my payment?” The best solution would be a mortgage modification. If you call your lender and ask them for a modification, they each have their own set of criteria. Follow that and you can often stay in your house for less money.

The majority of people, even with government programs to encourage such activity, still do not qualify for a modification, which leaves people with a couple of options. 1) Do you continue to overpay for your house that has gone down in value or 2) Do you attempt to do something about it. Some people have a moral compass that pushes them toward #1, but assuming that you are not dissuaded by that, there are limited options. Usually the best option is to sell your house. The reason for this is because over 95% of people qualify for a “short sale” with limited or no deficiency. Almost 50% of short sales in the last few months have included a relocation payment to the seller (meaning you can get $3,000 in pocket to sell your house for less than it is worth).

No earthly situation comes without negatives. The negatives of short selling your house, as one might tell you, are basically in two categories. First, the potential knock to your credit score and second, the potential that someone will not deal with you at all because it is a mark on your permanent record. The first is likely unavoidable, unless you want to just throw lots of money at a house that is underwater. Of course, if you had that money, you probably wouldn’t be leveraged to the point of becoming upside down. If you’ve been making your payments, the actual hit to your credit score is less than you think. If you haven’t been making payments, you need not worry, as your score already stinks.

On the other hand, it is becoming easier to work with banks all the time. Recently, the big banks and programs reduced the amount of time to wait to one year. This makes it all the more beneficial to go ahead and sell the house which is more debt than benefit as soon as possible. Regardless of what you might think will happen in the economy, it is undeniable that continuing to pay for something that is worth less than you owe is a worse financial decision, all other things being equal, than to pay for something that is worth exactly what you owe on it.

On the other hand, if the opposite question arises, “What if your home value has gone up but your income has gone down?” This is where a legitimate refinance might be a legitimate option, but you cannot qualify for one, because of your income. You want to take advantage of the potential to lower your payment, but you fear your income is at the point where most companies may not want to give you a mortgage. This is where difficult advice needs to be given. The ratios needed to get loans are in place for a reason. And while Dave Ramsay can teach you better than I can, the reality is that if you are exceeding those ratios, you need to purchase a cheaper home (or cheaper housing option).

The positive of the situation is that you have equity and when you sell your house, you will pocket some change. However, if you cannot qualify to make payments, you are almost assuredly living “above your wage.” Those who are self employed and “hiding” income as write-offs and distributions are the exception, but they also know the game they’re playing already. Take that equity, buy a less expensive home, and decrease your payment. If you cannot afford any home, pay off your other debt, and start investing in Roth IRA’s. When your income is back where you can afford a house payment, purchase again.

If there is some other situation you have, feel free to ask, but often people attempt to lower their payment by refinancing and/or extending the loan they have. This is often counter productive, as it saves a little money now, but it elongates your commitment to pay down the road. Sometimes a little higher payment is advisable. If you can afford a 15-year loan, attempt to do so. If you are paid bi-weekly, attempt to make an extra half-payment on those 3-paycheck months. Pay off your house early. Imagine a life where you are still earning money and you have no house payment! What kind of great life could you have then!

A Good Name

1 Mar

“A Good name is rather to be chosen than great riches, and loving favour rather than silver and gold”

I am a lucky man. I’ve known this for some time. I married a prize among prizes and have three incredible kids, all of whom are better than I deserve. That is easy to see and is commonly accepted by people who know and see me. But my blessings run much deeper.

We are all prisoners of those things to which our parents expose us. This can be positive or negative. Our perspective of normal is shaded by those things we see in our formative years. I’ll never forget the first time I began to realize the depth of my blessing. I was having a discussion with a godly man and good friend whose parents had built up such a negative reputation that he was unable to pursue an opportunity he might otherwise have had.

While I am truly saddened by this reality, I have come to discover it is not that uncommon In our world. I was speaking with a friend in another state just over a week ago, whose parents left him thousands of dollars of debt in his name.

Those examples are both parents who would, in many ways, be considered good parents. I’m not even talking about parents who are malicious toward their children, as was well discussed in this blog. These are just parents who failed to make a good family name for their children, which just makes life slightly more difficult.

I am really glad that I know of these things only on a second hand/theoretical level. I am frequently being introduced to people who know my parents and they are willing to give me a better chance because of it. As recently as yesterday, someone gave me a good business deal because of my dad. I have received work from people who trust me only because they know my mom.

Now why would I write this blog besides just to brag about my parents? Well bragging about them may be enough, but I think about what it means to pursue that biblical “good name” and I find that it is an easy concept for me to understand. It is what I want to leave behind for my children. It is the challenge I would have for anyone who might happen upon this blog post.

You see, whether it is your family, yourself, your business, your church or your Lord; anyone whose name you bear will be gathering information about that name from the things you do. Those things will be the impression people have when the name comes up. And building or maintaining that good name is something that should be done.

My friend, Jay Connors, once said, “live such that when others say bad things about you, no one will believe them.” That is what I want. I want to maintain that good name my parents fought for. I want to leave my kids that good name. I want to leave a good name in my business endeavors. I want people to think more of a church because we’re consistently conscious of having a good name. It is, after all, something to be chosen more so than loving favor, silver, or gold.