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Guide to

personal Finance & Real Estate

A Blank Slate Media / Litmor Publications Special Section • January 8, 2016

30 personal finance & real estate • News Times Newspapers, Friday, January 8, 2016

In trusts you should trust your finances

Michael C. Adges is a 1981 graduate of Stony Brook University (B.A.) and a 1984 graduate of the Benjamin N. Cardozo School of Law (J.D.) In 1989, he founded the Law Office of Michael C. Adges in Bayside, New York, specializing in real estate transactions. The office later re-located to Bellerose and Mineola and is now located in Williston Park, New York.

by a n n - m a rg a r e t carrozza

Mr. Adges has served in the capacities of both attorney and realtor on numerous real estate committees on the state and local levels. His experience as an investor - buying and selling properties in New York City and Long Island have given him an insider’s perspective on the real estate process.

Mr. Adges has had many speaking engagements - lecturing on such topics as bankruptcy, real estate transactions and ethics sponsored by the National Business Institute (NBI) and various banks and bar associations. He has also taught real estate transactions at CUNY School of Law in Queens.

Mr. Adges is a member of the Nassau County Bar Association, the New York Bar Association and Vice President of the Williston Area Chamber of Commerce. He is also a member of various networking groups.

Michael C. Adges Attorney at Law

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“Put not your trust in money, but put your money in trust” counseled Judge Learned Hand over 100 years ago.

The advice remains sound today — depending of course, on whether you know how to select the right trust.

Do you wish to reduce the estate tax bite for your children, protect assets in the event long-term care is needed, or merely wish to avoid probate? What is the best type of trust for your home and other assets?

1. Revocable Trust.

If you’ve ever attended a living (revocable) trust seminar, you may wonder why everyone doesn’t have one. The concept is very appealing. The creator can serve as his or her own trustee.

Full control over the assets in the trust is retained. There is no need to go to a third-party in order to access the trust.

The primary purpose of this type of trust is that it will avoid probate at death.

Assets in a revocable trust pass automatically (and privately) to one’s beneficiaries.

So good, so far — right?

What, if any, are the downsides?

There is only one that I can think of.

That is, when someone mistakenly believes that a revocable trust, can, in and of itself, protect a family’s home and other assets from estate taxes and other liabilities.

Common sense (as well as federal law) tells us otherwise.

Think about it. If I have total access to and control over my assets in the revocable trust, how can I then turn around and expect a nursing home to consider the assets unavailable?

The same goes for the Internal Revenue Service. Any asset that I have retained access to (even if it is only an income interest) will be included in my gross taxable estate at death.

It is very important to remember that assets do not avoid estate tax just because they may avoid probate.

2. Estate Tax Trust.

This type of irrevocable trust is useful for an individual or family with assets above the current federal estate tax threshold of $5.4 million.

One may not retain direct access to or control over the assets transferred into an estate tax trust.

A spouse, however, could be an in-

come beneficiary of this trust. The estate tax trust may be a good idea for an individual who wishes to shield some portion of his or her assets that are in excess of the current estate tax threshold. Anyone who owns life insurance should consider transferring it into an estate tax trust.

This will enable the death benefit to escape estate tax and pass to heirs tax free. We usually want to avoid putting the primary residence into an estate tax trust.

This is because we would lose our real estate property tax exemptions and the home would go to the children at death with a so-called carry over basis, thereby subjecting them to capital gains taxes. Investment properties or family businesses can be good candidates to place in an estate tax trust.

It is advisable to first transfer the business or investment real estate into an LLC. This way, the parents can retain controlling interests in the entity prior to transferring non-controlling interests into the estate tax trust.

3. Asset Protection Trust This trust is designed to protect one’s home and other assets in the event that long term care is later needed. There is currently a five-year “look-back” period on transfers to any individual or entity other than a spouse.

To commence the running of this clock (after which the assets are exempt for Medicaid purposes) the trust must be irrevocable.

It need not, however, be 100 percent irrevocable. One can retain the ability to change the beneficiaries and named trustee.

If the trust owns a home, the grantor may retain lifetime ownership rights over the house. It can be sold from within the trust provided that the grantor gives his or her written consent to the sale.

One’s property tax exemptions, stepup in tax basis at death and the $250,000 capital gains exclusion ($500,000 for a couple) will be all be preserved with a properly drafted asset protection trust.

This type of trust will also prevent the house from passing to my husband’s new wife, in the event that he survives me and then remarries.

Ann Margaret Carrozza is a renowned Elder Law and Estate Planning Attorney who served as a New York State Assemblywoman. She is a frequent contributor to television and print media outlets. www.myelderlawattorney.com

We offer a complimentary consultation 516-742-1741

105 Hillside Ave., Suite D Williston Park, NY 11596 www.adgesesq.com

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News Times Newspapers, Friday, January 8, 2016 • personal finance & real estate

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32 pERsonal FInancE & REal EstatE • News Times Newspapers, Friday, January 8, 2016

things to consider before buying an investment property Real estate can be an incredibly fruitful investment. Buying a property at the right time can provide investors with a substantial return when they decide to sell, and that opportunity compels many men and women to consider investing in real estate.

While there’s no denying real estate can yield a great return on buyers’ initial investments, there’s more to making money in real estate than simply buying a property and waiting for its value to rise. Buyers who are thinking of investing in real estate should consider a host of factors before purchasing an investment property.

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tive real estate investors should study before buying an investment property.

Would-be real estate investors can explore real estate websites such as Zillow.com for recent sale information, which may also be available through local government agencies. Such data can be invaluable, showing potential investors which neighborhoods are in demand and which may be in decline.

Taxes Investment properties are not eligible for as many tax benefits as primary residences. However, landlords can write off repairs, management costs and other fees associated with rental properties. But it’s not just their own tax bill prospective investors should consider before buying an investment property. Many potential buyers down the

road may prefer a property in an area where property taxes are relatively low, so even if you can afford the tax on the investment property, you may find buyers are unwilling to assume that burden when you put the property up for sale in the future.

Location Prospective real estate investors no doubt know the value of location with regard to real estate, but if you can’t afford to buy in a neighborhood that’s currently hot, that does not necessarily mean you can’t still capitalize on that area’s popularity. When a town becomes popular, its property values rise, and many buyers find themselves just barely priced out. When that happens, the surrounding towns tend to become the next hot neighborhood, as these areas are nearly as

close to the attractions that make the initial neighborhood so desirable. Buying on the outskirts of a hot neighborhood can set you up to benefit nicely when that area gets too pricey.

Schools School systems should be examined even if you do not have children. In a recent Trulia.com survey of American home buyers, 35 percent of respondents with children under age 18 indicated they want to live in great school districts. GreatSchools.org has profiles of 200,000 public, public charter and private preK12 schools. Investors can use the GreatSchools.org search engine to find information about local schools and school systems so they can better position themselves to buy properties in areas that will appeal to buyers down the road.

Did you know?

Prospective borrowers can take several steps to earn lower interest rates when applying for loans. Lenders consider a host of factors when determining interest rates for their borrowers. Some of these factors are market-based, while others are determined by the United States Federal Reserve. But borrowers are not helpless when it comes to securing low interest rates. The down payment amount as well as borrowers’ credit scores and histories can help or hurt them when it comes to interest rates. For example, the larger the down payment a potential home buyer is willing to put down to buy a home, the more likely that borrower earns a lower interest rate from his or her bank. That’s because the bank sees borrowers who are willing to put down a substantial sum of their own money as highly likely to repay the loan in full and on time. In addition, borrowers with strong credit histories and high credit scores have already demonstrated their ability to repay their debts, and that reputation often benefits them in the form of lower interest rates on major purchases like homes and automobiles.

Borrowers also may be able to secure low interest rates if they are willing to repay loans quickly. The shorter the duration to maturity, the smaller the interest rate may be. That’s because banks see long-term loans as less likely to be repaid than short-term loans.

News Times Newspapers, Friday, January 8, 2016 • personal finance & real estate

33

Grieving your property taxes

By G eorg e H a b e r Every year, thousands of Nassau County homeowners pay more property tax than they need to.

By failing to file a formal grievance of their annual property assessment, which determines their property tax, they ignore the possibility of lowering their taxes.

“There’s no risk to challenging your property assessment,” said Charles Berman, receiver of taxes for the Town of North Hempstead, whose office is conducting “Grievance Workshops” throughout the town to educate homeowners on the process of challenging their property’s assessment.

Homeowners need to understand that their assessment can only go down or remain the same as it was if they challenge it.

“It can’t go up,” Berman said.

While the majority of homeowners who file grievances do this through private agencies that solicit clients to represent them, Berman said an increasing number of challengers fill out the necessary forms and file grievances “pro se” — representing themselves.

The two-page form required to correct a property tax assessment is available from Berman’s office or from the Nassau County Assessment Review Commission.

The form is also available from the county’s website (www.nassaucountyny. gov/arc/arow) or, in North Hempstead, from the Office of the Receiver of Taxes at 200 Plandome Road in Manhasset (www. northhempsteadny.gov).

Grievances may be mailed in to Nassau County or submitted online to the Assessment Review Commission on the county’s website.

Filing for the 2017-2018 year extends from Jan. 4 to March 1.

Contrary to popular opinion, Berman noted, “You do not need to use an attorney to file a grievance. You may file your own grievance and save the commission that an agency will take if it succeeds in reducing your taxes. Filing pro-se takes only a few

minutes to complete the application.”

A crucial element in challenging a tentative assessment by the county is the determination of “full market value.”

According to Berman, a homeowner needs to provide an “estimate of full market value” that is lower than the county’s number.

Important to understand, he said, is that the “market value” figure does not represent the sale price of the property.

Homeowners challenging their assessment must write a figure lower than the assessed valuation the county has indicated.

For example, if the tentative assessed valuation is listed at $462,800, the homeowner may estimate the value at $362,000 and enter that figure in Part B of the form which requests the “Owners’ Estimate of Full Market Value.”

Also important to understand, Berman said, is that aspects of the location of the property, of which the assessor’s office may not have considered, need to be noted by the homeowner in the appeal.

For example, if the property abuts a commercial property or LIRR tracks, is near a sump or a firehouse, or is off a major highway, these location features may affect the value of the property and will be considered in the reassessment.

Berman said it is also possible to compare assessments of a neighbor’s property to one’s own.

This information, which is available online, can be used as a factor to challenge the homeowner’s own assessment, but the owner must officially file to receive the reduction.

Berman’s office is conducting Grievance Workshops throughout the Town of North Hempstead from January through February.

Workshops are offered in the afternoon and evening in Great Neck, Williston Park, Albertson, New Hyde Park, Roslyn, Manhasset, Westbury and East Williston.

To obtain the complete schedule, contact the town offices at 200 Plandome Road in Manhasset (516) 869-7800; or go to www.northhempsteadny.gov.

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34 personal finance & real estate • News Times Newspapers, Friday, January 8, 2016

How to rebuild Private firms show edge in grieving your credit use credit cards and pay your balances in full and on time is an essential part of rebuilding your credit. Use your credit cards to pay small monthly bills, such as your gym membership, and pay the balance in full each month. Over time, doing so will produce a pattern that indicates you are worthy of credit and capable of handling it responsibly.

Apply for an installment loan. Another way to demonstrate your credit worthiness to prospective lenders is to apply for and get an installment loan. If your credit mishaps are very recent, you may want to wait to apply for an installment loan until you have started to rebound and indicate you can once again pay your bills in full and on time each month. Waiting will earn you a more borrower-friendly interest rate, and you won’t be running the risk of being denied for a loan. But it’s good to apply for an installment loan such as an auto loan because you can then use that to restore your financial reputation by making monthly payments on time.

Many men and women work hard to build strong credit and demonstrate their worthiness as borrowers to lenders. But sometimes an unforeseen event, such as a layoff or medical emergency, forces people to rely too heavily on credit, which can negatively affect their credit rating and make them less likely to secure favorable loans in the future.

Rebuilding credit takes time. Lenders want their borrowers to have demonstrated their long-term financial responsibility, so it may take men and women who have suffered a credit setback a substantial amount of time to regain the trust of prospective lenders. But there is a way to rebuild credit and restore your financial reputation.

Examine your credit report. The first step toward rebuilding your credit is to examine where you currently are.

Some credit card companies now offer monthly credit reports or credit updates free of charge to cardholders. If you do not have such a card, the Fair Credit Reporting Act permits consumers to request a free credit report once every 12 months from each of the three major credit reporting agencies (i.e., Equifax, Experian and TransUnion). Examine your credit report for any errors, and dispute such errors immediately.

Start using your cards again.

Men and women who have been through the bad credit wringer may want to avoid swiping their credit cards ever again. But demonstrating your ability to

Make all of your payments. Once your credit has taken a hit and your score has sunk, lenders will look for any signs that you may still be a credit risk. Even as your score begins to rise once again, you must continue to make all of your payments on time. One skipped or missed payment is a big red flag to lenders, especially if borrowers have had credit troubles in the past. Don’t let all your hard work go to waste by missing payments.

Rebuilding credit is not always so easy, but many people have endured financial troubles only to reemerge as borrowers lenders want to work with.

By G eorg e H a b e r Statistics reveal that “a homeowner’s best chance to keep money the county erroneously tried to collect [in property taxes] is to hire a private firm.”

This was the conclusion of a Newsday study of tax grievance firms that analyzed the political clout of the firms in Nassau County.

The survey, reported last August, determined that the seven largest firms in the county handled 72 percent of the nearly 137,000 property tax challenges filed for the 2015 tax year.

Of these claims, 88 percent were settled in the homeowner’s favor.

This is a substantially higher percentage than the number of cases settled when homeowners filed their own challenge.

“County Executive Mangano’s assessment settlement program produces huge benefits for homeowners who use the tax grievance process,” says Craig Norberto of the Tax Correction Agency in Ronkonkoma, which has been serving homeowners in Nassau and Suffolk Counties for 23 years. “Those that don’t lose out on big savings.”

The average tax savings of clients Norberto represents, he says, is 31 percent.

Companies that offer help in reducing property taxes typically charge half of the tax savings.

Recently, as competition for serving homeowners has increased private companies have started offering reduced fees. Empire Tax Reductions in Glenwood Landing cites specific savings reductions it has achieved in various zip codes, including more than 30 tax cuts for Jericho homes ranging from $2,686 to $7,989.

“Our discounted fee is only 40 percent of the tax savings,” Empire says, noting that “fees are calculated after taking your exemptions into account.”

The private agencies are alike in explaining that if they are not successful in reducing property taxes, they charge no fee.

“I feel there’s nothing to lose,” said Elinor Grumet of Jericho, who has been using a private firm to challenge her home’s assessment every year for the past decade.

“I think I could do the paperwork myself if I had the time,” Grumet said, “but it seems like the private firms have proven track records in achieving reductions, so I stay with them.”

“Homeowners typically receive many solicitations from attorneys and others who offer to file grievance applications,” observed Helen McQueen of the Nassau County Assessment Review Commission in a talk last year.

McQueen encouraged homeowners “to file their own grievance” to save the fee. “It’s a simple process,” she said. “The attorney fills out the same paperwork as the homeowner, but the homeowner knows his property better” and can cite specific features of the property that may favorably affect the final assessment.

For example, say assessment consultants, a property may be near a baseball field, or a commercial business, or off a heavily trafficked main street — all of which could affect the property’s fair market value and consequently the property assessment. Any of these “special features” should be noted when filing the appeal.

That the word about the benefits of challenging property assessments is getting around — principally because of aggressive mailings and advertising by tax grievance companies — is suggested by the fact that for the 2012-2013 tax year, almost 90 percent of grievances were filed in Nassau County by more than 125 private companies, representing residential property owners.

Only approximately 11 percent of the grievances were field by individuals on their own behalf.

Mark Miller, an attorney with Maidenbaum Property Tax Reduction Group in Cedarhurst, notes that homeowners do not need an attorney to file their grievance.

In fact, anyone may represent a homeowner if the homeowner feels he or she need help in preparing the documentation. Miller said. However, that if a legal issue arises, or an appeal is denied, formal legal challenges may be necessary, which an attorney is in the best position to handle.

While the number of tax preparers in Nassau County has grown steadily over the past decade, Town of North Hempstead Receiver of Taxes Charles Berman said “this is an unregulated industry.”

Before signing the form authorizing a preparer to handle a homeowner’s property tax grievance, Berman said, it’s a good idea to check the preparer’s business reputation on a site such as the Better Business Bureau (www.bbb.org/newyork-city).

News Times Newspapers, Friday, January 8, 2016 • personal finance & real estate

How to find a financial planner Managing money can be a daunting task. Monitoring retirement and investment accounts can sometimes seem like a fulltime job, and that’s in addition to the responsibilities many men and women already face with regards to their careers and families.

To combat the sometimes confusing and intimidating nature of money management, many people enlist the help of financial planners. Financial planners can help men and women navigate the plan for retirement and help them prepare for unforeseen events that can affect their finances. Finding the right financial planner can be similar to finding a physician; just like you don’t want to trust just anyone with your health, you also don’t want your finances in the hands of someone you don’t trust.

The following are a handful of tips for men and women as they look for financial planners who they can be comfortable with for years to come.

Choose a certified planner. Many financial professionals claim to be planners, but only those men and women who are certified financial planners, or CFPs, are licensed and regulated.

CFPs must take various classes with regard to financial planning and pass an exam administered by the Certified Financial Planner Board of Standards. In addition, a requirement to maintain their designation as CFPs is that, once certified, CFPs continue their education so they can stay abreast of the latest industry trends and developments. While CFP status does not guarantee a given planner will meet your needs, it’s a good place to start.

Consider how a CFP earns his or her living. How a CFP earns his or her living is another factor to consider. Commissionbased financial planners earn commissions when buying or selling a stock, while fee-based planners earn a percentage of

35

your annual assets. Many people starting out prefer planners who earn hourly fees, feeling that such a pay structure makes them more comfortable and gives them time to build up a relationship with their planners.

Work with a fiduciary. Financial planners are held to two standards: the fiduciary standard and the suitability standard. The latter requires that planners give advice that suits investors’ objectives, while the former requires planners to give advice that puts their clients’ best interests ahead of their own. So what’s the difference? A planner beholden to the suitability standard can recommend the least suitable investment option (which may earn him or her more money) among a handful of suitable options, without having to report to his or her client any conflicts of interest, whereas a fiduciary is obligated to recommend the option that is best for the client.

Be wary of boasts. Some planners will try to impress prospective clients with boastful talk of beating the market. Such boastfulness should raise a red flag, as it suggests a planner is more likely to roll the dice with your money than

make sound investments.

Finding a trustworthy financial planner is a great way to grow your money. But who to work with is a decision that requires careful thought and research.

36 personal finance & real estate • News Times Newspapers, Friday, January 8, 2016

3 ways to Understanding life insurance maintain good credit Life insurance is a product few people want to think about. That’s perfectly understandable, as life insurance forces men and women to consider their own mortality.

But life insurance is not something adults should avoid, especially if they have dependents.

Many people should consider life insurance when estate planning so they can provide security for their loved ones. But life insurance is a purchase unlike any other, and people may be confused or intimidated when attempting to purchase life insurance policies.

A good credit score can go a long way toward helping men and women secure their financial futures. When armed with a good credit score, men and women can secure lower interest rates on mortgages and auto loans, saving them thousands upon thousands of dollars over their lifetimes.

Some people deftly use credit to their advantage their whole lives by never missing a payment or never digging themselves into deep holes with regard to consumer debt. Others fight an uphill battle, earning a great credit score after digging themselves out of debt accumulated in early adulthood. Regardless of how men and women made it to the top of the credit score mountain, once they’re there the work has only just begun. Credit scores are fluid, so high scores must be maintained in order for lenders to continue to view prospective borrowers as worthy investments. The following are a handful of ways consumers can maintain their high credit scores so they can continue to benefit from their well-earned financial reputations.

1. Routinely monitor your score.

Credit scores change constantly, so it’s important that you continue to monitor your score to make sure there are no inaccuracies that can affect your standing. While each of the three major credit reporting agencies (Equifax, Experian and TransUnion) must supply one free copy of your credit report every 12 months upon your request, some credit card companies now offer free monthly credit report updates. Cardholders can take advantage of such offerings to monitor their scores. Report any discrepancies to the appropriate rating agency immediately.

2. Sign up for automatic bill pay.

Credit scores can plunge quickly when consumers miss payments. No one is perfect, so it’s not out of the question that you

might miss a payment one time. Numerous factors contribute to your credit score, but payment history is perhaps the most influential variable when determining the final score, so a single missed payment can do significant harm. One way to avoid that and protect your credit score at the same time is to sign up for automatic bill pay. When signing up, use a bank account that always has a relatively high balance so you don’t run the risk of having insubstantial funds when the money is automatically deducted from your account.

3. Don’t use too much of your credit.

One of the benefits of having a great credit score is your available credit is likely to go up. That’s because lenders see consumers with high credit scores as good investments worthy of higher lines of credit.

But using too much credit, even when you have a high score, can be detrimental to that score. Credit utilization is another factor used to determine your credit score.

Your credit utilization rate is the sum of all your balances divided by your total available credit. A study from CreditKarma. com found a strong correlation between credit utilization rates and credit scores, as consumers who had lower utilization rates generally had higher scores. While it’s important to use credit (the study also found those with a zero percent utilization rate had lower credit scores than consumers with rates between 1 and 20 percent), avoid using too much of your available credit. Even if you pay your balances in full and on time each month, a high utilization rate may hurt your score.

Achieving a good credit score is only half the battle for consumers. Once that credit score is high, consumers must take steps to maintain it so they can continue to benefit for years to come.

Deciding if you need coverage While life insurance seems like the kind of thing every person should have, that’s not necessarily the case. For example, single men and women with no dependents and no tax or debt concerns generally do not need life insurance. If you are single but have tax issues or a considerable amount of debt, then a life insurance policy can be used to pay those debts upon your death.

Adults with dependents, such as a spouse and/or children, should consider purchasing life insurance, which can help your surviving dependents maintain their quality of life and pay their bills in the wake of your death.

Buying life insurance Much like various other types of insurance, life insurance can be purchased from an insurance agent or via an insurance company’s website. When choosing a company from which to buy a life insurance policy, look for a company with a strong rating, as no one wants to end up being burned by a life insurance provider who goes out of business. Some people prefer to work with independent brokers who can share information about products from various providers rather than just the

ones offered by the firm company-affiliated agents work for.

Choosing coverage When choosing coverage, you will no doubt be asked if you prefer term insurance or permanent insurance. Term insurance is the least expensive life insurance, and such policies only last for a predetermined number of years. Men and women may purchase life insurance policies if they only want life insurance until they retire or until their children reach adulthood. Permanent insurance is more expensive and will last from the moment you purchase the policy until your death. Many people choose permanent life insurance policies so the money their beneficiaries receive upon their death can be used to pay estate taxes.

In addition, there is an investment component to permanent insurance policies, as a portion of the premiums on such policies is invested (policies will spell out how the money is invested) and allowed to grow tax-free so long as the policy is open. Term insurance only provides protection with no investments.

When choosing how much coverage to purchase, it’s easy to go overboard and aim for as much as possible. However, many financial advisors suggest purchasing enough coverage to pay for funeral costs and a level of income replacement you can comfortably afford. If your spouse does not work, you should consider purchasing enough coverage so he or she can afford to pay the family’s day-to-day cost of living expenses.

Life insurance merits serious consideration, and adults should do their homework and fully understand a policy before signing any contracts.