The AARP Foundation Litigation unit filed a class action lawsuit yesterday against Wells Fargo Bank and the Federal National Mortgage Association (Fannie Mae), charging that they failed to allow surviving spouses and heirs of reverse mortgage borrowers to purchase the property for the appraised value after loans came due — typically after the borrower’s death.
AARP’s litigators won an earlier round on reverse loan foreclosures in April, when the U.S. Department of Housing and Urban Development (HUD) reversed itself on a rule that was forcing spouses borrowers into foreclosure.
At the heart of the dispute is what happens to the most popular type of reverse mortgage, the Home Equity Conversion Mortgage (HECM), which is regulated and insured by HUD passes on to a spouse or an heir. The HECM is designed so that borrowers can never owe more than the value of their homes, even though the loan balances rise over time. The intent was to assure elderly borrowers that HECMs were safe.
When Alice (who asked that her real name not be used) and her husband bought their vacation home 1983, they knew it was special: a 4,500 square foot beachfront house in the Crystal River, Florida area, with views of the sunrise, the sunset and the Gulf of Mexico.
After 55 years of marriage, Alice’s husband passed away in 1999 — the same year the couple put the home in a Qualified Personal Residence Trust, or QPRT. That way, she could pass it down to her sons and not incur huge hits on estate and gift taxes.
It’s been a decade since the first round of Bush-era tax cuts and it’s clear that — even in the wake of a new round of cuts late last year — employment growth is still dismal. Lost tax revenues trickled up to those who needed it the least, the deficit ballooned even more and the housing market is still punch drunk.
For those whose loved ones died in 2010, this is the time to wrap up their estates. Last year was an unusual year — the estate tax disappeared altogether to the benefit of some and the detriment of others. But in its absence, a different capital gains tax emerged. That means anyone sorting out a 2010 estate now gets to choose which tax to pay.
The choices are to pay the estate tax under its new rules, which allows for a $5 million exemption and a maximum tax rate of 35 percent, or to opt out of the estate tax and elect what’s known as “carryover basis.” The answer you might think — to opt out of the estate tax — is likely the poor choice for the vast majority of people.
The days of scratching your head as you try to decipher an insurance policy riddled with complex legalese may soon be over.
Sun Life Financial has launched a company-wide campaign to effectively translate technical jargon into “plain language.”
Estate taxes affect very few people, but for those with seven- or eight-figure estates that are impacted, the end of this year is a crazy, crazy time.
That’s because going from a year with no estate tax (as 2010, oddly, was) to a year in which the estate tax is back (but with a $5 million exemption and large gifting possibilities) raises all kinds of quandaries for those who are very ill and for their families.
What’s that old adage? Nothing is certain but death and taxes? Well, not in 2010.
Call it a loophole, a lapse or a hiatus – whatever way you want to spin it, the 2009 Congressional estate tax stalemate meant America’s uber-rich passed their billions on to heirs tax free this year. Or did they?
The new tax bill just passed by Congress added a few more turrets to a hopelessly medieval fortress.
Each tax break still supports thousands of economic fiefdoms: $6 billion for the ethanol industry, $235 million for Puerto Rican rum makers, $40 million for NASCAR stock car track owners .
Lance Hall is the co-founder & President of FMV Opinions. The opinions expressed here are his own.
On Monday, President Obama announced that he had reached an agreement, in principle, with the Republicans on the extension of the Bush tax cuts. One of the items negotiated was the estate tax. In this case, the Republicans got what they wanted: a 35 percent estate tax and a $5 million exemption.
Now that the Washington tax deal is law, most Americans don’t need to worry about estate taxes – so long as they don’t die in the next two years. The agreement between President Obama and Republican lawmakers ends the current uncertainty on estate taxes with an ultra-generous $5 million exemption per individual, with estates over that amount taxed at a 35 percent rate.
But the Obama-GOP tax deal simply kicks the can down the road on both income and estate tax rates into the 2012 election season – and that’s assuming the estate tax provision makes it through Congress.