DGAA bLAWg

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


Tags

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

Archive