Considerations for Owning a Vacation Home

Web Admin - Monday, August 31, 2015

Illinois real estate lawyerWhen owning a vacation home, there are several issues that need to be considered, including estate planning, how the property will be owned, and potential tax implications. If you plan on purchasing a vacation home with a friend or a family member, deciding how the property will be owned is important. Ordinarily, this type of ownership is what is known as tenancy in common. Under a tenancy in common ownership, each owner is named on the deed, along with each owner’s respective ownership percentage.

An alternative is for all of the prospective owners to form a limited liability company (LLC) and have it purchase and own the home. While this does create the additional task of forming the LLC, the individual assets of each member of the LLC are protected. A disadvantage is that the individuals of the LLC cannot claim property tax or mortgage interest deductions.

Tax Issues

The capital gains tax applies to the portion of the proceeds (upon the sale of a home) that exceeds the purchase price of the property plus the cost of any improvements made. For most taxpayers, the tax rate for long-term capital gains is 15 percent. An important provision of the tax code is the primary residence exclusion to the capital gains tax. This exclusion allows for married couples to exclude up to $500,000 ($250,000 for single owners) in capital gains for the sale of a principal residence.

Critically, the home must have been the principal residence (where you and your spouse live) for two of the last five years. This period does not need to be consecutively; rather, the home must have been the principal residence for a total of 24 months out of the last five years. The primary residence exclusion can be used multiple times, but cannot be used more than once every two years.

In relation to vacation homes, ordinarily the primary residence exclusion cannot be used (as a vacation home is normally not the principal residence). However, if the vacation home is established as the principal residence (by satisfying the two out of the past five year rule), the exclusion can be used. This may be very beneficial if a vacation home significantly increased in value.  

Passing Home to Heirs

Often, owners of vacation homes desire to keep those homes within the family. As a result, this requires planning for how the home will be passed down. There are numerous different methods of leaving property to a beneficiary. Each of those methods has different advantages and disadvantages. It is important to keep in mind that the following only briefly describes just three of the methods for passing on property. For more detailed information about estate planning, you should speak with an attorney.

For example, property can be passed to children or other heirs upon the owner’s death. This creates a step-up in basis for the beneficiary, which is a large advantage should the beneficiary sell the property. It also allows for the owner to retain complete control until death. However, it is not a tax-friendly option for the owner.

Alternatively, an owner can give the property as an outright gift. Under this method, the owner transfers the property by deed to the beneficiary. This accomplishes an immediate transfer of ownership. However, the federal gift tax limits the amount that can be transferred. Additionally, the step-up in basis is lost.

Finally, one option that is becoming more popular is to place the property into a trust for named beneficiaries. Under this plan, the owner reserves the right to use the property for a specified period of time. After the trust term expires, the beneficiaries take ownership of the property, with significantly reduced, or eliminated, federal and state taxes. Critically, for this method to work, the person who formed the trust must out-live the trust term.

For more information about the ownership of a vacation home, reach out to an experienced Illinois real estate attorney today. Our firm proudly represents individuals throughout the northwest suburbs, including the communities of Inverness, South Barrington, Arlington Heights, Long Grove, Mount Prospect, Riverwoods, Schaumburg, and Kenilworth.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

A Beginner’s Guide to Applying for a Mortgage Loan

Web Admin - Thursday, February 20, 2014

illinois mortgage loan lawyerFor many first-time home buyers, the process of applying for a mortgage can seem complex. This guide will explain the basics of the process, such as the timeline for applying for a mortgage, the documents that applicants should procure and bring, and the credit score and down payment that applicants should expect.

The Mortgage Timeline

The mortgage process begins with a pre-approval application. The purpose of the preapproval process is to let the bank or lender look into the applicant’s finances, in order to make sure that they can afford a loan. This is when banks ask for most of the documentation. Often they want things such as:

- a list of addresses and landlords;
- a list of previous employers;
- pay-stubs from the previous one or two months, with a person’s year-to-date earnings included as well;
- the last two year’s W-2 forms;
- two months of bank statements for all accounts;
- a list of all debts not on the applicant’s credit report; and
- a list of all other real estate that the applicant already owns.

If the applicant has already found a house that they like, and their offer has been accepted, then the bank will also want the seller’s contact information and a copy of the contract. Being ready to provide these documents can help speed up the mortgage process.

Once a person goes through the pre-approval process and has made an offer on a house, the bank will order an appraisal on it. The appraiser will go through the house and determine the value, and then the bank will take their assessment into account when calculating how large a loan they can offer. Generally speaking, the bank will base their offer on either the appraisal value or the purchase price, depending on which is lower.

After the appraisal, the loan underwriter will look at all the documentation to make sure the loan is a good investment for the bank. From start to finish, the whole process usually takes about four to six weeks on the bank’s end, but timelines may vary, and asking the lender in the beginning may be a good idea.

Credit Scores and Down Payments

In addition to the array of documentation, lenders will also expect borrowers to have good credit scores and money available to make a down payment on the house. The rule of thumb for a conventional loan, according to U.S. News, is that a borrower would need a credit score of at least 650. Conventional loans also require, on average, a down payment of around 20 percent. Borrowers may have an alternative in the Fair Housing Act loan, which is a loan insured by the federal government. These loans offer a 3.5 percent down payment with a 580 credit score, and a 10 percent down payment with a 500 credit score.

If you are going through the process of buying a home, contact an Illinois real estate attorney today. Our team serves people in many northwest suburban areas including Inverness, Barrington and Long Grove.

About the Author: Attorney Jay Andrew is founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

Recent Posts


commercial leasing special needs trust subcontractor institutional trustee criminal record Arlington Heights car crash attorneys Do Not Resuscitate trucking accidents probate fees traffic crimes Deer Park motorcycle accident lawyer personal injury lawyer unpaid assessment Deer Park medical malpractice attorney real estate zoning wills and trusts underfunded trust deadly crashes Palatine criminal defense lawyer Rolling Meadows personal injury lawyer employment law denied insurance claim drug crime privacy medical malpractice, missed diagnosis, delayed diagnosis, medical mistake, Deer Creek medical malpractice lawyers license Illinois rollover accident lawyers liability problem employees Rolling Meadows probate lawyer Palatine real estate lawyer taxes commercial real estate Buffalo Grove injury lawyer car crash Home Remodeling Repair Act employment lawyer Crystal Lake criminal defense attorney living wills Jay Andrew Buffalo Grove real estate attorney breach of contract probate lawyer swimming pools golf accidents insurance claim dispute attorney Chicago attorney first degree murder Barrington criminal defense lawyer Schaumburg criminal attorney guardianship attorney Illinois real estate Illinois registered agent Crystal Lake insurance lawyer Buffalo Grove criminal defense lawyer traffic accidents federal regulations for LLCs traffic tickets wrongful termination, employment law, whistleblower protections, Illinois employment laws, discrimination in the workplace Illinois employment law attorney investment property Illinois estate planning attorney foreclosed rental property Deer Park traffic accident attorney Deer Park DUI lawyer Inverness elder law lawyer Liquor Control Act Illinois insurance claim dispute lawyer low-ball insurance settlement healthcare drug possession caregiver Arlington Heights Attorney insurance claim dispute Arlington Heights accident attorney personal injury, auto accident injuries, delayed injuries, serious injuries, Des Plaines personal injury attorneys Des Plaines personal injury lawyers IRS Des Plaines civil attorney Palatine trusts lawyer products liability employee discrimination material misrepresentation Chicago biking tips power of attorney for healthcare Illinois insurance attorney Illinois driving without license Illinois attorney Schaumburg wrongful death attorney Crystal Lake civil litigation lawyer Rolling Meadows accident lawyer Long Grove estate planning attorney dram shop law employee rights bad faith insurance claims Des Plaines drug crimes lawyer Rolling Meadows criminal attorney Palatine civil litigation lawyer CAM texting while driving Crystal Lake traffic attorney employment attorney Barrington criminal lawyer Palatine elder law attorney Inverness personal injury attorney Arlington Heights injury attorney in terrorem provision Des Plaines claims law firm defective products lawyer elder law marijuana Palatine employment attorney llinois Real Estate Lawyers Association Illinois traffic accident lawyer medical malpractice landlord uninsured motorist real estate leasing Buffalo Grove personal injury lawyer car crashes Buffalo Grove traffic attorney fiduciary rule delay license revocation Illinois insurance claim attorney insurance claim denials unpaid overtime overtime pay product liability Crystal Lake medical malpractice lawyer estate planning, digital assets, Revised Uniform Fiduciary Access to Digital Assets Act, Illinois digital assets, Illinois estate planning, Illinois LLC creation changes to mortgage law Illinois will lawyer Barrington personal injury attorney Barrington litigation attorney Des Plaines pet law attorney appealing an insurance claim Colin Gilbert Chicago insurance claim attorneys deed transfer denial of insurance claim medical malpractice compensation Rolling Meadows traffic violations defense home inspection lawyer Federal Food Drug and Cosmetic Act Illinois workers compensation lawyer suspended license construction accidents, personal injury, wrongful death, Arlington Heights personal injury attorneys, workers' compensation Arlington Heights TBI attorney mortgage manufacturing real estate wage theft murder trucking accident lawyers drugs controlled substance underage DUI most common reasons for life insurance claim denials Crystal Lake car accident lawyer overtime violations Illinois real estate lawyer Arlington Heights insurance attorney Illinois insurance lawyer Barrington Illinois estate planning lawyer pizza emoji DUI attorney distracted driving accident victims Des Plaines real estate attorney Chicago traffic lawyer motorcycle accident lawyer traumatic brain injury Illinois personal injury Illinois home inspection expungement preventable medical errors living trust employment law, Illinois employment laws Rolling Meadows boating crash lawyer automated cars Illinois construction accident attorney Des Plaines personal injury attorney Kenilworth estate planning attorney Arlington Heights car accident lawyer car accident lawyers Illinois jet ski accident lawyer Class A misdemeanor insurance denial appeals Illinois mortgages criminal defense Crystal Lake car accident attorney trust payments Illinois speeding lawyer natural gas Illinois workplace discrimination attorney Rolling Meadows litigation lawyer Illinois Rolling Meadows employment law attorneys Illinois job attorney Illinois defective products attorney modern family estate planning Fair Labor Standards Act Affordable Care Act Landlord Tenant Ordinance jet ski hit and run accident Schaumburg construction accident lawyer trustee caretaker rights Inverness DUI lawyer Crystal Lake personal injury lawyer Illinois business lawyer truck collisions Illinois Probate Act of 1975 personal injury claim defective products Palatine construction attorney IRA trust transfer Inverness real estate attorney Barrington estate planning lawyer Schaumburg personal injury attorney head on collisions Chicago will attorney, social media platforms, Illinois estate planning lawyer, insurance claims Crystal Lake business law attorneys digital information Rolling Meadows traffic attorney BUI drug crimes lapse in policy Illinois pet lawyer workplace sexual harassment Crystal Lake pet attorney hiring employees Chicago employment lawyer power of attorney Illinois corporate lawyer Illinois personal injury lawyers personal injury claims Buffalo Grove traffic lawyers Schaumburg personal injury lawyers IRA benefits boating DUI work unions distracted driving accidents estate attorney Arlington Heights personal injury attorney digital assets natural gas explosion no contest clauses landlord tenant law Illinois insurance disputes Schaumburg probate attorney Illinois Workers’ Compensation Commission traffic deaths life insurance lawyer loopholes food poisoning GM ignition switches preventing accidents Illinois wills and trusts Palatine injury attorney severance agreements operating agreements small business crossover accidents Schaumburg estate planning lawyer life insurance claim denial, denial of life insurance claim wrongful death medication errors car accident Rolling Meadows personal injury attorney Des Plaines criminal attorney Illinois small business underinsured motorist Self-Directed IRA Accounts LLCs Illinois medical malpractice attorney Deer Park workers compensation lawyer Barrington employment law attorney digital assets, digital fiduciary, estate planning, digital content, Long Grove estate planning lawyers Inverness civil lawyer healthcare claims Schaumburg insurance lawyers Illinois personal injury attorney sole proprietorship Chicago car accident lawyer employment law, meal breaks, rest breaks, hotel employees, Des Plaines employment law attorneys Long Grove real estate attorney Illinois Transfer on Death Instrument insurance dispute attorney income distribution deducation estate plan Rolling Meadows traffic law firm Schaumburg injury lawyer Crystal Lake bike accident lawyer Illinois pedestrian accident attorney Schaumburg estate planning attorney disability benefits rumble strips liens irrevocable trust real estate contract eluding a police officer Chicago employment attorney texting and driving Buffalo Grove law firm Illinois insurance claims lawyers Illinois Trust Code corporate law Chicago lawyer insurance negligence employment contract, employment law, employment at-will, Deer Park employment law attorneys, contract, Illinois traffic attorneys comparative negligence workers compensation pregnant women life insurance claims Schaumburg traffic lawyer consent to a search Rolling Meadows estate planning attorney Des Plaines tax law firm Illinois Wage Payment and Collection Act gift tax exemption, estate planning, estate planning strategies, Illinois estate planning, South Barrington estate planning attorneys Employment Discrimination Law Inverness injury lawyer employment contract Illinois civil litigation lawyer agent Crystal Lake medical malpractice attorneys Des Plaines drug lawyer Mount Prospect real estate lawyer spinal cord injuries bike accident boating accidents Crystal Lake pedestrian accident lawyer criminal financial advisors child safety South Barrington real estate attorney Deer Park employment law attorney Crystal Lake law firm personal injury accidents Illinois medical malpractice claim sexual harassment traffic laws Schaumburg drug defense lawyer loss of consortium accidental death benefits health insurance dispute pay when paid contract trauma after an accident Illinois collections attorney jet ski accidents Crystal Lake estate planning lawyer Attorney Ken Apicella Illinois boating accident lawyer Rolling Meadows life insurance claim denial attorney insurance dispute field sobriety test Arlington Heights personal injury lawyer Crystal Lake medical malpractice law firm Crystal Lake tax lawyer owner responsibility Illinois wrongful termination lawyer insurance disputes, Illinois insurance disputes, Illinois insurance dispute attorneys, denied insurance claims, Arlington Heights insurance dispute attorneys job lawyers traffic offenses brain injury rollover car crashes Illinois medical malpractice lawyers cell phone Mount Prospect elder law attorney compensatory time Rolling Meadows DUI lawyer car collision coronavirus fatal car accidents Palatine probate lawyer Retaliatory Discharge Arlington Heights wills and trusts attorney Colin H. Gilbert Barrington injury attorney social media after death DUI penalities IRELA digital evidence hands free device Palatine law firm Rolling Meadows insurance dispute lawyers blended families estate planning attorney civil litigation personal injury Illinois employment laws digital media accounts, estate planning, Arlington Heights estate planning attorney, installment contracts insurance claim workers compensation benefits Barrington workers compensation attorney Illinois workplace lawyer Illinois car accident attorney Rolling Meadows Traffic Lawyer PTSD wrongful termination driving real estate lawyer Rolling Meadows car accident lawyers Schaumburg estate attorney murder defense attorney fees how to avoid common denials of life insurance claims Illinois injury lawyer School Visitation Rights Act life insurance Illinois living will Arlington Heights estate planning attorney real estate attorneys icy parking lots Palatine corporate law attorneys rent to own real estate contracts Palatine personal injury lawyer Barrington employment law firm Illinois employment attorneys bicycle dooring accidents business litigation Crystal lake insurance dispute attorney rollover accidents insurance disputes Barrington boating accident attorney dog bites ken apicella Chicago estate planning Palatine punch death Schaumburg employment law attorneys Rolling Meadows employment attorney reckless homicide estate planning Arlington Heights employment attorney Illinois medical malpractice case surgical mistakes Legal Info Chicago estate planning lawyer TBI boating under the influence holiday statistics Des Plaines personal injury lawyer Schaumburg elder law lawyer Rolling Meadows insurance dispute lawyers, insurance dispute Des Plaines insurance attorney Deer Park real estate law firm tax attorney Crystal Lake will lawyer Crystal Lake employment lawyer Arlington Heights real estate lawyer Palatine estate planning lawyer rest breaks Schaumburg real estate lawyer real estate closing beneficiary complications Whistleblower Claims Barrington Traffic Lawyer clemency condo Detainer Actions Super Mario Inverness probate lawyer Rolling Meadows real estate attorney Palatine traffic accidents Palatine business attorney Deer Park accident attorney Barrington drug crime attorney Buffalo Grove personal injury attorney Des Plaines motorcycle accident attorney Mount Prospect wills and trusts lawyers construction contracts Schaumburg corporate attorney Buffalo Grove car accident lawyer Exclusions trench injuries fiduciary rule top life insurance claim denials auto accidents advance healthcare directive Deer Park personal injury lawyer commercial leases pedestrian-automobile accident Arlington Heights wills and trusts lawyers Kenilworth estate planning lawyer Rolling Meadows insurance attorney privacy laws Illinois employment lawyer probate process Des Plaines Traffic Lawyer ACA Rolling Meadows tax attorney ObamaCare Illinois traffic ticket lawyer Home Sale Contingencies Illinois Human Rights Act Barrington civil litigation attorney filing a medical malpractice claim Crystal Lake injury attorney Crystal Lake employment attorney Joliet general practice lawyers Illinois workers compensation attorney insurance agents trusts FMLA Illinois estate planning law firm Crystal Lake traffic lawyer Schaumburg Attorney mass shooting Des Plaines real estate lawyer Palatine life insurance lawyer Rolling Meadows medical malpractice lawyers estate planning trusts Inverness accident lawyer license reinstatement drunk driving living trust benefits forming a corporation in Illinois Transfer on Death Instrument BAC Illinois DUI attorney premises liability insurance attorney marijuana crimes attorney Barrington personal injury lawyer Buffalo Grove probate lawyer construction accidents bicycle accidents Illinois employment law attorneys Chicago trucking accident attorney Palatine insurance lawyer Inverness corporate attorney Buffalo Grove life insurance attorney Schaumburg car accident attorney Arlington Heights lawyer medical research Barrington estate planning attorney Inverness estate planning lawyer Barrington medical malpractice lawyers Illinois wills and trusts attorneys medical malpractice claims vacation home fines Rolling Meadows personal injury lawyers criminal law slip and fall Illinois lawyer Fourth of July living trust vs will slip and fall accidents startup company employees POA probate right to work personal injury attorney revenge porn breathalyzer test Barrington life insurance lawyer probate claims process Buffalo Grove medical malpractice lawyers spinal cord injury Des Plaines DMV Des Plaines DUI attorney DNR Illinois red light cameras Palatine traffic lawyer insurance claim delay sexual images senior citizens Illinois elder law attorney Palatine employment lawyer Arlington Heights wills and trusts attorneys Illinois trusts attorney residential real estate denied insurance claims Illinois employment law firm fault based insurance meal breaks Schaumburg employment attorney Illinois law Arlington Heights pedestrian accidents life insurance policy motorcycle accident comp time Inverness insurance attorney traffic violations liability claims Arlington Heights medical malpractice lawyer speeding Rolling Meadows Attorney Rolling Meadows corporate lawyer Illinois insurance dispute lawyers Rolling Meadows insurance lawyer Schaumburg criminal law attorney Rolling Meadows employment law attorney insurance dispute, insurance dispute lawyers, insurance claim denial, insurance claim delays, Rolling Meadows insurance dispute attorneys Long Grove wills and trusts attorneys personal injury law firm pain and suffering capital gains tax Deer Park traffic lawyer real estate attorney Arlington Heights employment law attorneys Des Plaines accident attorney Arlington Heights tax lawyer Policy Cancellation cell phone tower data insurance denials gift taxes insurance claim denial Palatine civil attorney back injuries murder charges internet Thanksgiving Chicago insurance law firm Illinois motorcycle accident lawyer Long Grove real estate lawyer BAIID Chicago corporate attorney Rolling Meadows drug defense attorney Kenilworth estate planning attorneys Illinois insurance claim dispute lawyers estate planning for college students Illinois employment law Illinois employee rights attorney. contracts Mt Prospect Attorney Crystal Lake employment law attorney civil rights violation car crash injuries Schaumburg civil litigation attorney estate planning lawyer car accidents Barrington real estate lawyer unauthorized overtime Des Plaines collections attorney South Barrington real estate lawyer Inverness traffic law firm elder abuse Illinois probate lawyer license suspension Schaumburg medical malpractice lawyer Illinois trucking safety wills paid sick leave Inverness real estate lawyer pedestrian accidents Long Grove estate planning workers comp civil litigation attorney blood alcohol content Illinois criminal defense attorney nursing home negligence DUI Barrington employment attorney unfunded trust dynasty trusts Crystal Lake accident attorney whistleblower protections Schaumburg personal injury lawyer estate tax insurance adjusters DGAA Family Medical Leave Act Arlington Heights wills and trusts lawyer minimum wage college kids Illinois business law atorneys Barrington attorney condo association probate claims Rolling Meadows marijuana attorney Illinois personal injury lawyer homestead rights Palatine Attorney Chicago life insurance attorney independent contractor drug crimes lawyer Rolling Meadows criminal lawyer Des Plaines injury law firm pedestrian accident Palatine drug lawyer Arlington Heights criminal lawyer cause-of-death exclusions vacation home Illinois tax attorney employee misclassification Food and Drug Administration's Food Safety Modernization Act dealing with problem employees Long Grove estate planning attorneys Palatine corporate attorney pet law Illinois Smoke Detector Act anesthesia errors Buffalo Grove employment lawyer new real estate form Schaumburg life insurance attorney Crystal Lake personal injury attorney Deer Park criminal attorney traumatic brain injuries Illinois Sales Representative Act car accident lawyer Des Plaines medical malpractice attorney insufficient documentation Rolling Meadows business lawyer Schaumburg Palatine employment law lawyer DUI defense Illinois traffic laws involuntary manslaughter Illinois estate planning Buffalo Grove insurance claim dispute lawyers pet bites Palatine workers compensation lawyer Riverwoods estate planning lawyer creditors cell phone accidents Arlington Heights trucking lawyer FSLA Forcible Entry Chicago will attorney medical marijuana Arlington Heights Traffic Lawyer Illinois bicycle safety Arlington Heights traffic attorney insurance agent negligence pedestrian injuries, pedestrian fatality foreclosure drunk driving statistics Illinois traffic attorney Buffalo Grove corporate attorney federal crimes estate planning, death tax, succession plans, business estate plans, Barrington estate planning lawyers denial of life insurance Barrington business law firm