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7 Things Every Home Buyer Should Know
Patricia Bloom-McDonald • May 29, 2014

Whether you are buying a home for the first time or thinking of upgrading from a condo or town home to a larger single dwelling or downsizing to a smaller home or from a house to a condo, home buyers should be advised, or reminded, of at least 7 things before purchasing a home:

  1. Get Your Credit Score Up. Your credit rating or score is the single most important factor in the rate you can obtain from a lender and the amount of your monthly payments. Most home buyers will need and want to be pre-approved for a loan to be a serious bidder for a home. Once you get your credit reports from all three major credit bureaus, review them for any reporting errors or records and take the necessary steps to correct them. If you have a record of delinquent payments, focus on making payments on time for a while and consider delaying your home buying plans until you get your credit score to at least 650.

  1. What House do You Need? There may always be houses that you want, but not that you need. If your family is growing, you may want another bedroom and a spacious backyard. Do you have pets? Is there a dog park nearby? Some people want a gourmet kitchen or lots of closet and storage space. Is it a place you can grow old in gracefully?  Consider how many stairs there are, where is your washer and dryer going to be, is there a shower that is easy to get in and out of?  You may not get all you want, but prioritize and also know what you can afford.

  1. Budgeting . You should obtain a mortgage that you are capable of paying while having enough discretionary funds for maintaining the home, paying your property taxes, insurance and meeting your family’s needs. This might require adhering to a strict budget so that you do not start missing monthly payments that can quickly accumulate.

  1. Where Do You Want to Live. Some homes look magnificent with a spacious lot, vast closet space and other amenities but your work commute might take two hours, the schools are nearing bankruptcy, there is little going on downtown and a new highway is planned to be built a few hundred yards away, how far is it way from your children or grandchildren. Always do your research on what a new location means for your children and yourself and have a reliable and knowledgeable realtor who will honesty advise you about the area in which you are considering a move.

  1. Does the House Need Work? You may have gotten a great deal on the house knowing that it needs a little work, but do you know what a “little” work really means? Also, are you that competent at making those repairs yourself and have you researched what permits you will need? If you plan on contractors performing the repairs or improvements, you will need one you can trust. In the end, the costs, time and headaches may not be worth the money you thought you were saving.

  1. The Down Payment. Many lenders require a 20% down payment but there are public and private lenders who do offer low-interest mortgages with a smaller percentage of a down payment. You do have to qualify but it pays to research these lenders and consider their terms.

  1. Hire Your Own Home Inspector. Once your offer is accepted, hire a competent home inspector, preferably an engineer or an experienced home contractor whom you know or who has been referred to you by someone you trust. The closing will have contingencies and having a home inspection should be one of them. If major structural problems are found, or if there are potential problems, you might reconsider buying or at least ask that the seller pay to remedy the problem first. Should you have concerns about the house, consult with a real estate lawyer about your legal options.

Retain Patricia Bloom-McDonald, a Massachusetts Real Estate Lawyer

 

Purchasing a home is probably the largest investment you will ever make, so why not ensure that you are prepared for the process, know your legal rights, and have someone who can advise you if something goes awry. Patricia Bloom-McDonald has been representing the interests of home buyers and sellers for years and has earned the trust of her clients in these life-altering transactions. Call her today for a free, initial consultation.

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Using a Credit Card When You Have a Special Needs Trust

25 May, 2023
A special needs trust (SNT) allows you to meet your needs while receiving government benefits, such as Medicaid/MassHealth and Supplemental Security Income (SSI). When you have a special needs trust, you can use it to pay for goods and services government benefits do not cover, such as therapy, education,and housing. Since receiving income directly from your trust would jeopardize your eligibility for benefits, your trustee cannot give you cash from your SNT. When you use a credit card for permitted transactions, and your trustee pays off the balance with funds from your trust, these payments to a credit card company are not considered income. An SSI or Medicaid/MassHealth recipient who is capable of managing their own affairs can therefore use a credit card to make small purchases, and the trustee of the special needs trust need not micromanage every transaction. In the past, beneficiaries of SNTs sent their bills to their trustees for payment. Today, an individual with an SNT who qualifies for a personal credit card may find that using a credit card is more convenient. Credit cards have several benefits. Using a credit card to manage payments from your special needs trust allows you to maintain independence, gain access to some of the advantages of a credit card, and easily keep records while preserving your eligibility for Medicaid/MassHealth and SSI. Although credit cards can help people manage their special needs trusts, there are also several important restrictions and considerations to keep in mind. Consult with a special needs planner to ensure all transactions are acceptable under the trust's rules and comply with government regulations. The Benefits of Using Credit Cards When You Have a Special Needs Trust If you have a special needs trust, using a credit card has many benefits, including: Independence : Allowing you to maintain your independence. You can use your card to make qualifying purchases yourself. Your trustee does not have to make the transactions for you. Access to the Typical Advantages of a Credit Card : Using it responsibly can help you establish or build credit history, which may be important for your future financial needs. Record-Keeping : Credit cards provide easy record-keeping and a convenient way to monitor transactions from your special needs trust, which can also help special needs trustees fulfill their duty to maintain records. When you use your card, your trustee can observe your purchases and ensure that all expenses are allowable under the trust’s rules. Your statements can help your trustee keep track of funds leaving the trust. Benefits Eligibility : While adhering to Medicaid/MassHealth and SSI’s income and asset limits, you can access funds from your SNT. Credit cards can help prevent your trustee from accidentally providing you with cash payments that could affect your eligibility for government benefits. Considerations When Using a Credit Card for Your Special Needs Trust While you can use a credit card to access funds from your special needs trust for certain transactions , restrictions apply. If your trustee sees a charge on your card that could affect your benefits eligibility , they can flag it for review. You cannot use your credit card to pay for food and shelter, which SSI would cover. When administering your funds, your trustee must ensure that any expenditures are for your sole benefit if you have a first-party special needs trust. While using a credit card is appropriate, you should not use a debit card. Debit cards are considered cash income. Best Practices When using a credit card for a special needs trust fund, remember several best practices. Choose a card with low fees and interest rates. Set a clear budget and monitor transactions regularly. Keep thorough records and receipts of expenses. Consult with your special needs planning attorney. A special needs planning attorney can help you navigate the rules that apply to your trust and understand how to use a credit card to preserve your Medicaid/MassHealth and SSI eligibility. 

How an ILIT can help offset estate taxes

12 May, 2023
With the Federal estate tax exemption possibly about to be lowered, it may be time to think about steps you can take to keep your estate from being taxed. An irrevocable life insurance trust allows you to pass on money to your heirs while avoiding both the federal estate tax, as well as any applicable state estate tax which is currently $1 million in the Commonwealth of Massachusetts. Senate Democrats have proposed lowering the current estate tax exemption from $11.7 million for individuals and $23.4 million for couples to $3.5 million for individuals and $7 million for couples. While it is unclear if this proposal will pass, it is likely that some change to the estate tax is coming. Even if Congress does not take any action, the current rate will sunset in 2026 and essentially be cut in half, to about $6 million per individual. In the Commonwealth of Massachusetts, the current estate tax exemption is $1 million for individuals and is taxed at dollar $1.00. A proposal to raise it to $3 Million and the tax to start at $3 Million (not at $1.00) has been submitted in the legislature but has not yet been voted on or enacted. One way to make up for any estate tax your estate may have to pay is by setting up an irrevocable life insurance trust [ILIT]and funding it with a policy that has a death benefit that would pay your heirs some or all of the amount your estate will be taxed. If you purchased such a life insurance policy directly, it could end up being taxed as part of your estate. But if a trust owned the policy, it could pass outside your estate. While a life insurance trust can be highly beneficial, it is also complicated to set up and maintain properly. The following are some of the requirements: Trustee . If you are setting up the trust, you cannot also serve as a trustee. If you are the trustee, you have control of the trust, which could lead to the trust being included in your estate. You will need to name another trusted person or financial institution to act as trustee. Policy ownership . The trust must own the life insurance policy. If you transfer an existing policy to the trust and die within three years, the policy will still be considered a part of your estate. To avoid this risk, the trust can purchase a policy directly rather than receive an existing policy. Premiums . You need to transfer funds to the trust to pay the policy premiums, which creates an issue with gift taxes. A transfer to a trust is usually not subject to the $15,000 yearly gift tax exclusion. For a gift to qualify for the exclusion, the recipient must have a "present interest" in the money. Because a promise to give someone money later does not count as a present interest, most gifts to trusts aren't excluded from the gift tax. To avoid this, you can use something called a “Crummey” power which gives beneficiaries the right to withdraw the funds transferred to the trust for up to 30 days. As part of the process, the trustee needs to send them a letter, known as a Crummey letter, letting them know about the trust funding and their right to withdraw the funds. After the 30 days have passed, the trustee can use the funds to pay the annual insurance premium. You run the risk of the beneficiaries withdrawing the funds, but if they know that by allowing the money to stay in the trust they will receive more money later, it shouldn’t be a problem. Beneficiaries . The beneficiary of the life insurance policy is usually the trust. Once the funds are deposited in the trust, the trustee can distribute the assets to the beneficiaries in the way specified by the trust. For example, if your beneficiaries are minors, you can wait to have the trustee distribute the assets. Keeping the assets in the trust will also protect them from your beneficiaries’ creditors. The downside of an irrevocable life insurance trust is that you do not have the ability to change it once it is set up, although the policy would effectively be canceled if you stopped paying the premiums. If you are considering this type of trust, discuss it with your attorney.
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