Wednesday, June 26, 2013

How does the Supreme Court's DOMA decision affect the real estate industry?

As you've surely heard, today, the U.S. Supreme Court declared critical portions of the Defense of Marriage Act (DOMA) unconstitutional.  For those who don't know, although some states (including New York) have recognized same-sex marriage as legal, DOMA defines marriage to exist only between a man and a woman - denying same-sex couples a multitude of federal benefits and rights which heterosexual couples regularly enjoy.

In United States v. Windsor, Edith Windsor was legally married in New York to Thea Spyer but was slapped with $363,000 federal estate tax bill because she was denied use of the spousal exemption to the federal estate tax.  Today, the Supreme Court ruled that DOMA's definition of "spouse" and "marriage" as exclusively heterosexual is in violation of the U.S. Constitution's Fifth Amendment right to equal protection.  You can read the decision here.

But why should you, purely from the point of view of a professional in the real estate industry, care about this decision?  Taxes, taxes, and more taxes.  Real estate holdings are often a couples' most valuable assets.  Left unattended, these assets can create some tax headaches down the road when it comes time to transfer title.


Estate Tax and Gift Tax Spousal Exemption

The Internal Revenue Code ("IRC") has an exemption which allows a spouse to leave their entire estate, regardless of value, to their surviving spouse - tax free.  This exemption was the genesis of Edith Windsor's lawsuit.  She was taxed on the inherited estate of her spouse because DOMA barred her from using the unlimited spousal exemption.  If you prefer to transfer your assets while alive, the IRC also provides for a gift tax exemption.  Normally, each person may only "gift" a certain amount of assets each year, and/or over the course of their lifetime.  However, if you make that gift to your spouse, there are no limits to the amount you transfer.  Now, with the Supreme Court's DOMA decision, same-sex spouses can use the same spousal exemptions that heterosexual couples have been using.


Internal Revenue Code Section 121- Primary Residence Capital Gains Exemption

IRC Section 121 expands the maximum capital gains tax exemption for the sale of a primary residence from $250,000 to $500,000 in the case of married couples filing a joint return.  Even further, this section permits the surviving spouse to claim a $500,000 exemption if the sale is made within two years of the death of their spouse.  Now, same-sex couples have access to the larger capital gains tax exemption for married couples.


Doubling and Splitting of Tax Exemptions

There are a few cases where the IRC permits married couples to double or split exemptions.  For instance, compared to a single individual, a married couple may double the amount gifted each year without reporting the gift to the IRS.  As another example, in 2013, each estate has a blanket $5.25 million exemption from taxes.  However, a surviving spouse may be able to utilize unused portions of their deceased partner's estate tax exemption to expand their own exemption to over $10 million.  With the Supreme Court's DOMA decision, same-sex couples now have more options to play with when planning their estate.


Federal Income Tax

For all the good news the DOMA decision brings, it might not be all sunshine and roses for same-sex couples in terms of tax benefits.  Filing jointly does not necessarily mean lower income tax liability, and in fact, can often lead to greater tax liability.  Every individual case is different and each couple should fully explore what effects a joint filing will have on their tax liability.


GO SEE A TAX PROFESSIONAL!

Every individual is strongly encouraged to seek the advice of a tax and/or estate planning professional if they have any questions regarding the application of these tax benefits.  Whether you are a same-sex couple eager to explore the new options available to you, or a heterosexual couple just now delving into some estate planning for your future, estate planning is an important and extremely nuanced aspect of asset management best left to professionals.  Also, if you have wrongfully been charged a tax like Edith Windsor, see your attorney asap to get a refund!!!

Storm Front CE and IDAs Post-Sandy

At last evening's continuing education course, Storm Front, I discussed Bill Number S5776-2013, which relates to permitted use of funds of an industrial development agency.

This bill, if enacted, would amend the law "to allow for the approval of Industrial Development Agency projects for property specifically used in making retail sales in areas directly impacted negatively by a natural disaster".

So, I highly suggest that local real estate agents support this Bill as it will benefit your community. At the least, take a read and understand what an IDA is and how it is applicable to your profession.

Also, at the course, I promised to provide a link to the Building Science & Rebuilding branch of FEMA's Building Code Resource, which can be located here. This is a valuable resource when rebuilding in the wake of a storm to enable a more resilient structure for the next one - as I said, we do live on an Island.

Tuesday, June 25, 2013

Brokerage: End of corporate titles ushers in professionalism. Check out the NYREJ for featured article...

Check out Page 12 of The New York Real Estate Journal. Latest Article published by Andrew Lieb, "Brokerage: End of corporate titles ushers in professionalism". In this article, Andrew discusses the latest update in advertising regulations and the practice of Real Estate Professionals in NY.




Monday, June 24, 2013

Lieb at Law is hiring! Position available for a 2013 College Graduate

Attention College Graduates! Take a Year Off Before Law School

Join a thriving law firm that leads our profession through advocacy and advice supported by cutting-edge technology and know-how.  This exciting opportunity is for a 2013 college graduate looking for valuable office and legal experience before heading to law school.  You will be exposed to real estate transactions and litigation, learn the court system and assist in cases from real estate brokerage and mortgage foreclosure litigation through matrimonial, collections and personal injury. The foundation and knowledge obtained in this position will not only get you ready for law school, but will give you an essential competitive edge before starting your legal career. 

Ideal qualities: Self-driven, organized, resourceful, assertive and dynamic. Must strive to be the best.

Prove yourself and several opportunities for advancement including law clerk positions throughout law school and beyond.  This position is full time and located in our Center Moriches office. 

To apply, email cover letter and resume to careers@liebatlaw.com. Writing sample is preferred. 

Monday, June 17, 2013

Making Home Affordable Program extended to 12/31/2015

Pursuant to Supplemental Directive 13-04 of this month, the Making Home Affordable Program, including HAFA (short sales) and HAMP (mortgage mods), is extended through the end of 2015.

Additionally, Supplemental Directive 13-04 simplifies the income documentation requirements under HAMP, by modifications to the rules concerning Form 4506-T; Benefit Income; Verification of Monthly Gross Expenses; Wage or Salary Income; Self Employment Income; Rental Income; and Alimony, Separation Maintenance and Child Support.

To illustrate, now the requirement that a servicer must verify monthly gross expenses is removed and a servicer may just rely on a borrowers stated expenses. With respect to the other categories, the Supplemental Directive enables the servicer to "verify such income in accordance with the [...] documentation the servicer relies on when modifying loans held in its own portfolio..."

The extension is certainly welcomed as the foreclosure crisis is far from over. Also, these new rules are smart as they simplify an unnecessarily complex process, which has resulted in both lenders and borrowers being frozen in time when seeking to follow the rules. Instead, its expected that more decisions will be made whether to modify a loan based upon these changes.

Wednesday, June 12, 2013

HUD 2012 Housing Discrimination Study: Housing Discrimination Against Racial and Ethnic Minorities

HUD just issued its study of incidence and forms of discrimination experienced by black, Hispanic, and Asian renters and homebuyers.

The study finds that "minority homeseekers are told about and shown fewer homes and apartments than whites", as a result of more than 8,000 tests conducted in 28 metropolitan areas.

Clearly discrimination still exists in housing. However, the study takes pains to explain that differing circumstances of classes of people in housing does not equal discrimination. Instead, the discrimination is only present when it causes the resulting disability in housing.

Real estate agents should read the Executive Summary, understand discrimination and be mindful to weed out such practices as we always strive to bring professionalism to our field.

Thursday, June 6, 2013

Credit Score and Old Credit Cards

We are often questioned about our advice at our Mortgage Mania class that its okay to cancel old credit cards. People say - Lieb you are wrong.

Well here is a Business Insider article by John Ulzheimer of SmartCredit.com that seems to agree with us. Have a read and decide for yourselves.