Wealthy Americans worried about the prospect of higher estate and gift taxes might have more time to come up with a strategy.
With Jon Ossoff and Raphael Warnock both winning their Senate runoff elections in Georgia, the Democrats now have control — albeit precarious — of the Senate.
That will help President-elect Joe Biden push his legislative agenda, and higher taxes are expected to be a major part of his plans
The estate tax could be a prime target for Democrats.
Biden has repeatedly suggested that wealthy Americans are not paying their “fair share” of taxes. He has indicated that he plans to reduce the tax exemption for estates and gifts and increase the rates at which they are taxed to “historic norms. Biden will have trouble implementing his policies even with a Democratic Congress, pro says
That could mean reducing the amount an individual can transfer free of estate tax to $3.5 million, lowering the lifetime exemption for gifts to $1 million and raising the tax rate on transfers over those amounts to 45%.
Currently, individuals have a unified $11.7 million estate and gift exemption. Transfers exceeding that amount are subject to a top tax rate of 40%.
These generous terms are set to expire at the end of 2025.
“The higher exemption and the lower tax rates will not last forever,” said Dustin Stamper, managing director of Grant Thornton’s national tax office.
Tax overhauls take a backseat to pandemic relief
Wealthy families may still have time to revisit their estate plans — and do so under today’s friendly terms.
Despite the Democrats’ control of the White House and both houses of Congress, Stamper believes the window for estate planning remains open for wealthy Americans.
“I think the exemption and rates will eventually be on the table, but I don’t think it’s likely this year,” he said.
“This administration will be focused on the pandemic and on economic relief and won’t be eager to take money out of the economy,” Stamper said.
The new administration may also choose to avoid the politically charged estate tax debate this year, given the relatively small revenue it generates, said Alvina Lo, chief wealth strategist for Wilmington Trust.
Households will file about 4,100 federal estate tax returns for people who died in 2020 — only approximately 1,900 of them will be taxable, according to estimates from the Tax Policy Center.Good business owners are typically control freaks. It’s very hard for them to give up control of their businesses to a trust. Alvina Lo CHIEF WEALTH STRATEGIST FOR WILMINGTON TRUST
Those returns could generate roughly $16 billion in estate tax liability for 2020, the center estimated.
“The estate tax is not a big revenue raiser,” said Lo at Wilmington Trust. “It’s a drop in the bucket in terms of paying for things like the stimulus package.”
“Even with a Democratic president, House and Senate, the estate tax may not be at the top of their agenda,” she said.
In other words, the window to use the huge exemption to avoid estate taxes may remain open for another year.
“We have two kinds of clients,” Lo said. “Some were gung-ho and put strategies in place before year-end, while others were on the fence and may now take action in the first quarter.”
Prime time for asset transfers
It is not just the tax policy outlook that’s driving estate planning.
“With interest rates at historic lows and many asset values depressed, there are opportunities to pass on those assets to others at a low cost,” said Stamper of Grant Thornton.
Two of the most popular vehicles to achieve that goal are grantor retained annuity trusts and charitable lead annuity trusts.
Both types of trusts move assets with high appreciation potential —— typically business assets or securities – into an irrevocable trust.
The grantor retained annuity trust makes payments to the grantor for a specified term. Once the term is up, the assets go to heirs. This administration will be focused on the pandemic and on economic relief and won’t be eager to take money out of the economy. Dustin Stamper MANAGING DIRECTOR OF GRANT THORNTON’S NATIONAL TAX OFFICE
Meanwhile, the charitable lead annuity trust pays a stream of income to a charity for a stated period before the remaining assets pass to a beneficiary.
“The objective is to freeze the value of the estate assets for tax purposes,” Stamper said. “The potential future appreciation of those assets can then be passed on to beneficiaries tax-free.”
Wealthy families weighing these strategies need to consider a trade-off: While they’re saving on taxes, they’re also relinquishing control of the assets.
“Good business owners are typically control freaks,” Lo said. “It’s very hard for them to give up control of their businesses to a trust.”
As powerful as these estate-planning strategies can be in terms of tax savings, they are not for everyone.
These tactics may make the most sense for people with estates that exceed $25 million, said Stamper.
Even if the exemption is cut in half during President-elect Biden’s term, a married couple will still be able to pass on nearly $12 million to their heirs tax-free.
“If you’re not going to be taxed, some of these transfers can hurt you,” Stamper said.RELATED
How do I get a free EIN number from the IRS? You may apply for an EIN in various ways, and now you may apply online. This is a free service offered by the Internal Revenue Service and you can get your EIN immediately. You must check with your state to make sure you need a state number or charter.
How do I get a free EIN number from the IRS?
You may apply for an EIN in various ways, and now you may apply online. This is a free service offered by the Internal Revenue Service and you can get your EIN immediately. You must check with your state to make sure you need a state number or charter.
Are federal EIN numbers public record?
Your employer identification number (EIN), or FEIN, allows you to do business and report financial information to the Internal Revenue Service. However, an EIN number is a public record, making your company vulnerable to people who care less about your business.
Is Ein the same as tax ID?
A Federal Tax Identification Number, also known as a “95 Number”, “E.I.N. Number,” or “Tax I.D. Number”, all refer to the nine digit number issued by the IRS. They are different names for the same number.
An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN. An LLC applies for an EIN by filing Form SS-4, Application for Employer Identification Number.
Are LLC tax returns public record?
No, business tax returns are not public in the United States. Corporate tax information is completely confidential. Neither the IRS or your tax preparer can release tax information to each other or to any third party without your consent.
We humans are the ones who burn fossil fuels and chop down forests, causing average temperatures to rise worldwide. That global warming trend is increasingly disrupting our climate — the average weather over many years.
Earth has already warmed by about 1 degree Celsius, or 1.8 degrees Fahrenheit, since the 19th century, before industry started to boom.
Climate change is breeding storms with heavier rainfall, flooding farms — such as this one, which grows cotton.
A warmer world — even by a half-degree Celsius — has more evaporation, leading to more water in the atmosphere. Such changing conditions put our agriculture, health, water supply and more at risk.
Picture a North Carolina cotton farm that’s been around since 1960, with global average temperatures rising by roughly half a degree since it grew its first crop.
The increased evaporation and additional moisture to the atmosphere has led to 30% more intense rain during heavy downpours in that part of the U.S.
Then a hurricane like 2018’s Florence — already strengthened by warmer oceans and higher seas — dumps this excess rainfall on the farm. The crops get more flooded and damaged than they did half a century ago.
It’s how you go from half-degree of warming to economic hardship.
There’s still time to act
Whether it’s a shift of 1.5 degrees or 2 degrees, these warming levels aren’t magic thresholds. Every rise in warming is worse for the planet than the last.
But they’re not inevitable.
It’s not too late to slow the pace of climate change as long as we act today. With your help, we can attack this challenge.
Act when it matters most
For African Americans, the struggle to own property in Detroit is almost as old as the city itself — tactics like redlining, restrictive covenants, and mob violence were long used to prevent black Detroiters from purchasing homes. And while, the city enjoyed a higher-than-average black homeownership rate by 2000, the recent subprime mortgage and tax foreclosure crises have reduced the city’s black homeownership rate to well below half.
The origin story of Detroit’s fight for equal ownership rights can be traced back to the Great Fire of 1805. Although there were a few black landowners among the riverfront farms near Detroit at the time, no African Americans owned land in the town itself. But after the fire, the young nation’s Congress promised a free lot in the new city to every adult who resided there at the time of the fire, regardless — in theory — of wealth, class, gender, or race.
To understand how and why land was distributed after the fire, let’s first cover some historical background.
The Act of 1806
Nineteen days after the great fire, the Michigan Territory came into existence and the ruins of Detroit became its capital. The territorial government was to consist of one governor and three judges, in addition to a secretary whose role was similar to lieutenant governor. When they were sworn into office, most of Detroit’s roughly 300 residents were either crowded into farmers’ homes, or in temporary shelters built on the Commons, a large meadow surrounding the town. That area was formerly the property of French and British kings, and then owned by the U.S. government. It was here that Augustus B. Woodward, one of the territorial judges, proposed rebuilding the new Detroit.
Governor William Hull and Judge Woodward lobbied Congress for permission to plan the new town on the federally owned Commons, leading to the passage of “An Act to provide for the adjustment of titles of land in the town of Detroit and territory of Michigan, and for other purposes” on April 21, 1806. In addition to granting the governor and judges the authority to plan a new territorial capital and issue deeds for property within it, the following provision was included:
And to every person, or the legal representative or representatives of every person, who, not owning or professing allegiance to any foreign power, and being above the age of seventeen years, did, on the eleventh day of June, 1805, when the old town of Detroit was burnt, own or inhabit a house in the same, there shall be granted, by the governor and judges aforesaid, or any three of them, and where they shall judge most proper, a lot, not exceeding the quantity of five thousand square feet.
Beginning that autumn, the governor and at least two of the three territorial judges held regular meetings as a Land Board to carry out their duties as the law directed. At their first meeting on September 8, 1806, they elevated Detroit from township to city status and codified Judge Woodward’s plan as the new basis of the city. They also determined that each recipient of a “free” lot would be required to pay one dollar to receive a copy of his or her deed. But when it came time to decide how the “donation lots” were to be allocated, egalitarianism dissolved into months of contentious bickering over who was entitled to the most valuable lots, and who would have first choice.
After failing to reach a consensus that met the citizens’ approval, the Land Board on Nov. 21, 1806 tasked Governor Hull with devising a solution once and for all. Adopting a previous suggestion, Hull divided potential claimants into several classes: Former property owners came first, heads of households who rented came second, and everybody else came third. On Dec. 31, Detroiters in the first and second classes drew ballots to determine which lot they would receive, contingent upon approval. An original handwritten copy of the governor’s report survives, listing claimants by class with the lot and section number they drew. Detroiters of the third class drew their ballots on Jan. 3, 1807.
The names of at least three free African Americans — Tom Parker, Elizabeth Cooper, and Hannah “at Mrs. Coate’s” — were included in the list of third-class claimants. At the very bottom of this class, in a separate list labeled “Negroes,” are the names of seven slaves: Harry, Hannah, and Cato (“at Mrs. Dodemead’s); London and Mary (“at Watson’s”); Margaret (“at Mrs. Voyer’s”), and Pompey (“at Mr. Abbott’s”).
Each one of these individuals drew a ballot for their donation lot, but only a handful would actually receive deeds to their property.
Sometimes the historical record can be used to trace not only the past ownership of land, but the possession of human beings as well. Found among the documents of prominent Detroiter Joseph Campau after his death was a bill of sale for an African American man, Pompey, to James May of Detroit for £38 sterling, dated June 1792. Two years later, May sold Pompey to John Askin for £45. Askin sold him in 1795 to James Donaldson for £50.
Although “Pompey” was a common slave name, it is likely that this was the same man who was enslaved by James Abbott, Jr. at the time of the 1805 fire. Abbott was born in Detroit in 1775 into one of Detroit’s wealthiest families, later becoming a successful lawyer and merchant. Incidentally, he was an uncle and the namesake of artist James Abbott McNeil Whistler.
At a meeting of the Land Board on Dec. 15, 1808, the minutes record that “a deed for lot 24, section 7, was ordered to be issued to Pomp [sic], a negro man.” The deed, eventually issued April 26, 1809, conveyed the property to “Pompey Abbott, (a man of colour) an inhabitant of the town of Detroit, on the 11th of June, 1805,” and bears the signatures of Territorial Secretary Reuben Atwater (as acting governor) and Judges John Griffin and James Witherell. Amazingly, the original deed has survived, and is preserved in the Abbott family papers at the Burton Historical Collection.
Pompey’s deed, signed in 1809.
Pompey’s lot was 60 feet wide by 100 feet deep, with its northeast corner clipped off by a turn in the rear alley. The site is the present day location of Bleu Detroit, a nightclub located at 1540 Woodward Ave. This Steamline Moderne building, designed by Cyril E. Schley, opened in 1942 as the Telenews Theater.
Pompey died less than five years later, never having sold his property and leaving no heirs. In that brief time, the slice of land, which since 1701 had been in the possession of the King of France, the King of England, and the United States of America, was the property of Pompey, a slave in Detroit. Ultimately, it was merely a symbolic victory, providing no material benefit to rectify the injustice he endured.
Twelve years after Pompey’s death, James Abbott, Jr. unlawfully sold Pompey’s lot to Thomas Cliff for $300 in 1836, extracting a final unearned profit from the man whom he regarded as property. The flaw in the title was evidently discovered, because Abbott found it necessary on Feb. 2, 1846 to petition Wayne County Probate Court to be appointed administrator of Pompey’s estate. He couldn’t remember exactly when his beloved servant died — his petition states that it was “January or February” of 1814. But Abbott did supposedly remember that Pompey owed him money, and had the gall to claim, in court documents, to be a creditor of the man he enslaved. The court appointed Abbott guardian and administrator of the estate, allowing him to validate his past sale of the property.
A deed for lot 37 in section 7 was ordered for Elizabeth Cooper at a meeting of the Land Board on Dec. 19, 1808. When the deed was drawn up, Governor Hull and Judges Griffin and Witherell signed it on Feb. 17, 1809.
Located at 1228 Woodward Ave., this lot was the home of Himelhoch’s clothing store from 1907 to 1922. The building was then acquired and demolished by J. L. Hudson’s to accommodate one of many additions to the department store. The Hudson’s building was imploded in 1998, and in 2017 ground was broken on a two-building, mixed-use development that will include Detroit’s new tallest skyscraper.
Elizabeth Cooper may have died before selling her property or leaving a will. On Jan. 31, 1824, the governor and judges relinquished her deed to a group of investors who were snatching up property in the city at the time.
Just north of Grand River Avenue on Farmer Street, next to the former PuppetART Theatre, workers are constructing a four-story segment of the new Shinola Hotel on what had long been a parking lot. The last structure to have stood here, 1413 Farmer St., was a neo-Gothic-style Detroit Edison power station constructed in 1928. This is lot 70 in section 7 in the Plan of Detroit, the parcel that Thomas Parker, a free black man, drew as his donation lot.
Acting Governor Atwater and Judges Griffin and Witherell signed the deed for this land to Parker at a meeting of the Land Board on March 18, 1809. The 1810 Detroit census shows Parker still living in the town, as the head of a household of five free non-white persons. On April 9, 1816, future Detroit mayor John R. Williams purchased Parker’s lot for $1,500. Given the Parker family’s presence within the corporation limits of Detroit in 1810 and the relatively high price that the lot sold for in 1816, it is plausible (although unlikely) that Parker built a simple home on this land.
Professor Tiya Miles‘ recent book, The Dawn of Detroit: A Chronicle of Slavery and Freedom in the City of the Straits, recounts a legal case in which Detroiter John Dodemead petitioned the territorial court for a writ of habeas corpus for “Hannah, a negro woman, and Thomas, a mulatto boy,” whom he claimed to own. Miles speculates that Thomas was Hannah’s son, and that John Dodemead was the father. But on Oct. 3, 1809, Judge Woodward ordered Hannah and Thomas’ release, citing the testimony of William McDowell Scott, who stated that Dodemead had previously denied owning the two. “The Said Hannah & Thomas are free persons,” Woodward ruled, “and not Slaves.” Yet Hannah continued working for the Dodemead family, evidently as an employee rather than as a slave.
By the time Hannah attempted to claim her property, 12 years had passed since the day she drew lot 51 in section 6, the northeast corner of Farmer Street and Monroe Avenue. According to the Land Board’s Dec. 12, 1818 meeting minutes, Land Board Secretary Austin E. Wing, “made application in behalf of a black woman called Hannah, now living with Mrs. [Jane] Dodomeade [sic], for a deed to a lot of ground situate [sic] and lying in the City of Detroit, numbered fifty-one, in section six, as her donation lot.” But by that time, her assigned parcel was no longer available. “Whereupon,” the minutes state, “it was ordered, that she receive a deed for lot numbered eleven, in section twelve, fronting on Adams Avenue fifty feet and in depth one hundred feet, containing five thousand square feet.”
For unknown reasons, the order was not carried out. The order was issued a second time four year later on March 18, 1822. The following day, Governor Lewis Cass and Judges Woodward and Witherell signed the long-awaited deed to “Hannah, a woman of colour living with Mrs. Dodemead.”
The lot’s availability at such a late date suggests that it was not a desirable location. The area was swampy in the 1820s, and the property contained less square footage than intended due to the Cass farm’s eastern border running up against it. Today, a six-story office building at 1922 Cass Ave. covers all of Hannah’s lot and portions of the adjacent lots. This structure was built for Detroit Creamery by Albert Kahn in 1920, but its appearance has since been “modernized.”
One hopes that Hannah — clearly a persistent and resourceful individual — enjoyed a greater degree of independence later in life. John Dodemead died in 1812; his widow, Jane, followed him less than six months after Hannah obtained her property. Six years later, on Nov. 21, 1828, Hannah sold the lot to lawyer George A. O’Keeffe for $40. And the deed does not refer to the seller as “Hannah, a woman of colour,” or “Dodemead’s negro,” as some documents do— here, she is simply referred to by her own full name, Hannah Ashley.
(The handwriting on the original deed was evidently unclear, as a transcript of the document provided by the Wayne County Register of Deeds alternates between the spellings “Ashley” and “Ashby.”)
Remembering the forgotten
There were at least 10 other African American survivors of the 1805 fire, both free and enslaved, but none received property. Six of them (Harry, Cato, London, Mary, Margaret, and another Hannah) drew lots but apparently did not apply for deeds. Four individuals (Joseph Cooper, Josette, Susan, and Nell) did not even draw lots. Perhaps some could not raise the $1 to obtain their deed. A few of these individuals were likely minors at the time of the fire; wealthy Detroiters were not shy about holding children as slaves. Clearly, the four individuals who received donation lots were exceptions and not the rule.
Several Detroiters of mixed racial backgrounds received donation lots as well. John Burnett, whose mother was Potawatomie, received lot 83 in section 6 — now a vacant lot on Bates Street west of Randolph. Two women identified as “mulattos,” Mrs. Ann Hall and Miss Nancy Hall, received lots 79 and 75 in section 8, respectively. These were kitty-corner from one another, at the southwest and northwest corners of Griswold and State Street.
There are no historical markers or other public memorials to honor the few black Detroiters who, after surviving the fire of 1805, held the government to its word and acquired land they were entitled to. The names of slave owners, however, are memorialized throughout the city. Abbott Street in Corktown is named for James Abbott, Jr., the man who enslaved Pompey and stole his property. Yet there is no Pompey Street, nor even simple informational plaques to mark these historical sites. The next time you’re walking downtown, consider visiting these locations and paying your respects to the few men and women who, having every other right denied them, became property owners in Detroit at the precise moment when the city began to rise from the ashes.
During quarantine, kids can miss out on the social benefits they typically get from interacting with others in a school environment, which could set them back in terms of social-emotional learning (SEL). SEL involves skills that build up a child’s confidence, help them develop relationships and promote their use of cognitive thinking to work through various social situations. And success in this process stems from collaboration, teamwork, the development of empathy and the healthy navigation of feelings — a level of emotional maturity that kids often learn from interacting with others in a classroom setting. But even if your child isn’t learning SEL in school or from other social situations while you’re sheltering in place, you can still assist them from the comfort of home.
A child’s SEL needs continual stimulation so they can develop these critical skills. Fortunately, many of the activities kids can do at home to facilitate better SEL are things they can do with parents — that may even be beneficial for parents as well. If you want to promote this learning at home, take a look at SEL activities you can do with your child to encourage their mental well-being and help them develop essential life skills.
Practice Mindfulness and Positive Self Talk
Mindfulness isn’t just a concept that’s helpful in the context of meditation like many people might imagine it is. It’s also a skill children and adults alike can use all throughout their daily lives. Although younger children might find it challenging to sit still for a long period of time, you can practice mindfulness with alternate activities that promote this type of healthy awareness about what they’re feeling.
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Teach your child how to be present with their thoughts and emotions by acknowledging them. One of the best ways to do that is to schedule time for reflection each day. Spend some time talking with them about their emotions. Ask them how they felt during a specific time period and what led up to that feeling. If your child becomes frustrated or upset during the day, pause your activities for a moment and talk about these feelings, emphasizing that they pass and while it’s important to recognize them, your child doesn’t have to act on them. This will also allow your child to develop empathy for themselves as well as others.
As adults, we’re often hard on ourselves, and children can mimic this behavior. Quarantine is a perfect opportunity to show your child that sometimes things like outside events aren’t in their control — but that the way they respond to their emotions is and that we’re all doing our best to manage. A fantastic way to become less critical of yourself — and help your child develop better self-esteem, too — is to introduce positive self-talk and affirmations and to start each day with a motivational quote. Your child can even stand in front of the mirror with you as you both repeat affirmations that encourage confidence and positivity.Advertisement
Incorporate Games and Art
It’s important to engage a child’s brain during quarantine with thought-provoking activities, not just digital devices and time spent looking at screens. While it may be tempting to let your child watch a couple of movies to stay occupied, this won’t contribute to their SEL. However, you can easily promote that mental stimulation through fun SEL games and activities you might both enjoy. From setting up a scavenger hunt to designing a vision board to writing letters to mail to friends and family, there’s a lot you can do to enjoy some creativity together.
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Schools often let children explore their artistic sides in more ways than one and allow them to get creative. Make sure you continue these efforts during quarantine. Get hands-on with creating art — you might use Pinterest to find various projects and try to recreate them with your child. Try to keep these activities fun and engaging, and have regular check-ins with your child to gauge how they’re feeling about the projects and whether they want to switch things up.Advertisement
Keep in mind that you can find plenty of affordable art project ideas online that can still fit into your budget. You can also use whatever’s available at home and turn it into art, which will encourage creative problem solving and improve your child’s imagination.
Teach Them How to Manage Strong Emotions
The American Academy of Pediatrics acknowledges that redirecting unwanted behaviors is much more effective than outright punishment. Sometimes, kids act out and can say or do hurtful things to others when they’re unsure how to manage emotions and events. Creating a corner where your child can wind down after doing something they shouldn’t allows them to regain composure and become more self-aware. You might put together a meditation corner with stuffed animals and a chart that shows various feelings. When your child misbehaves, you can go to the corner, let them have a quiet moment and discuss what led to the behavior by utilizing the feelings chart. This, in turn, helps your child get familiar with their emotions and the emotions others experience — an essential component of SEL.Advertisement
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Kids have feelings too, and as parents, we might forget to acknowledge that what they’re feeling is completely valid. They’re still building awareness around their emotions — they don’t understand things in the same context we do — and feeling something for the first time can be overwhelming for kids. Quarantine itself can be an incredibly stressful experience for children, which is why you want to provide a physical and emotional check-in. This will not only strengthen your family bond, but it will also ensure your child isn’t under immense pressure. Sometimes kids need a mental health day, too.
Although all of the above will contribute to your child’s development of stress-management skills, it’s also important to acknowledge one of the most beneficial stress-busting activities: exercise. Even in quarantine, your child needs a constructive outlet for their energy to release anxiety and enjoy better cognitive function. Don’t forget hugs; they’re proven to lower stress levels for your child and for you.Advertisement
Create a Chores List
Although this may not be one of the things your child looks forward to most, having a chore list is one of the most important because it teaches responsibility. But instead of creating a list and giving it to your little one, collaborate and create one together. This way, your child can be involved in responsible decision-making and see the value of teamwork.
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Writing a diary as a daily “to-do list” is also a good therapeutic activity for managing feelings. It allows kids to put their thoughts on paper, which sometimes brings a much-needed emotional release. Encourage daily journaling with various prompts. It could be as simple as starting a gratitude journal in which your child answers questions such as “What makes you feel thankful today?” Focus on specific things that encourage deeper thinking and allow your child to express themselves through writing if they’re old enough to do so.Advertisement
It’s important to note that SEL activities shouldn’t feel like chores. Instead, they should be exciting and stimulating. Only this way will they help bring out your child’s full potential and allow them to thrive emotionally and socially. Although quarantine is a stressful time for everyone in the family, it’s essential to take some time to address and look after your child’s emotional needs — and your own.
Defaulting on a home loan can have major financial consequences for the borrower. One form of default occurs when you don’t make your mortgage payments. When this occurs, the bank may decide to pursue a foreclosure on the property. Depending upon the state, the bank may be able to come after you for money following the foreclosure.
A foreclosure permits the bank to take possession of the home. The bank will seek to recoup some of the money owed on the mortgage loan. To do this, the bank will generally place the home up for sale. If the price of the home sale doesn’t cover the balance due on the mortgage loan, the difference is referred to as a deficiency. Depending upon your state law, you may be responsible for the deficiency amount and the lender may be able to pursue collection of that amount from you.
Recourse and Non-Recourse
Some states have loan recourse laws that permit a bank to seek legal action for a deficiency. In these states, the bank can file a lawsuit against you. The goal of the lawsuit is to obtain a judgment for the deficiency amount. Other states are non-recourse. This means that if you default on the mortgage loan, the bank can foreclose on the property but cannot sue you for any remaining deficiency amount. In this case, the bank will write the deficiency amount off as a loss. Check with your state’s attorney general to see if your state is recourse or non-recourse.
A deficiency judgment can place your personal assets at risk. A judgment gives the judgment owner the legal right to go after your assets in satisfaction of the judgment debt. For example, the bank may be able to garnish some of your employment wages. It may also be able to seize money in your checking or savings accounts up to the amount owed under the judgment. Plus, the bank may be able to place a lien on property that you own.
A deficiency from a foreclosure can follow you for several years. Even if you’re insolvent now, or currently lacking assets that the bank can seize, a judgment gives the bank the legal right to pursue payment of the judgment from you for years to come. Judgments have statutes of limitations and within this time frame, the bank may try to seize your assets. This time period will vary from state to state. In Florida, for example, the statute of limitations on judgments is 20 years.
Confused about how to build business credit? You’re not alone.
Many business owners and entrepreneurs don’t realize the key differences between business credit and personal credit, so let’s start there.
Your business credit and personal credit aren’t linked — but they may be related.
Business and personal credit contains different information, so the scores aren’t necessarily correlated. But if you’re a sole proprietor, it’s a good bet that banks and other lenders will reference your personal credit to see how well you manage debt.
“Many lenders review your personal credit before extending business credit,” says Caton Hanson, co-founder and chief legal officer of Nav, a company that helps business owners understand and monitor their business credit.
This is especially likely if you sign a personal guarantee when taking out a small business loan or opening a business credit card. A personal guarantee basically ensures you’ll be personally liable for the debt — a situation you want to avoid if possible, as it could put your personal assets at risk.
While your business credit and personal credit may be related in certain cases, you can take steps to separate them as your business grows.Find a credit card that works for meExplore Cards Now
Building business credit can take time
Even if you never plan on taking out a loan or tapping a line of credit, it can’t hurt to build your business credit. In fact, your business insurance premiums, equipment or office lease agreements, vendors’ terms, and ability to work with other companies could be influenced by it.
The good news? You can take steps to build your business credit even if your personal credit isn’t great. And once you’ve established good business credit, you may be able to qualify for financing without a personal guarantee.
The credit bureaus need to know your business exists before they can create credit reports for it. Here are some of the steps you may have to take to start building business credit:
Incorporate your business or form an LLC (limited liability company). This ensures your business entity will be separate from your personal identity.
Get a federal employer identification number (EIN). This is a free service offered by the IRS, and it also serves to identify you as a business entity. Apply for an EIN here.
Open checking and savings accounts for your business. Make sure you use your legal business name for any of your business banking accounts.
Get a dedicated business phone line. You’ll also want to make sure it’s listed under your legal business name.
Register with Dun & Bradstreet to get a D-U-N-S Number®. This is a nine-digit number used to identify each physical location of your business. It’s free for all businesses required to register with the federal government for contracts or grants. Get one here.
2. Scan your business credit reports for errors.
Business credit reporting agencies gather information from a variety of sources. Your business credit reports may include:
Your company’s contact information.
An overview of your business type and industry, key personnel, number of employees, years in business, subsidiaries and branches, and sales.
Financial data, including your business’s estimated sales, available credit, historical use of credit, payment history, credit inquiries and collection accounts.
Public records information, such as tax liens, judgments, lawsuits, bankruptcies or fraudulent activity related to your business.
Depending on the type of report, it may also contain a business credit score, recommendations from the business credit reporting agency for how much credit lenders should extend to your business and predictions from the business credit reporting agency on how likely your business is to fail.
Make sure the information in the reports is accurate and contact the bureaus individually to report and correct errors.
Wait… there’s more than one type of business credit report?
Yes! Dun & Bradstreet®, Experian® Business and Equifax® Business all create their own business credit reports. Some lenders and vendors may also turn to specialty business credit reports provided by other companies when evaluating your business.Find a credit card that works for meExplore Cards Now
3. Establish trade lines.
While a lot of information can wind up on your business credit reports, trade lines can be particularly important.
Business trade lines are lines of credit established between a business and a vendor, such as an account with an office supply company where the company allows the business to pay the account balance several days or weeks after receiving the inventory.
Vendors may report this account to any reporting agency, but they’re not required to do so. Depending on the type of credit report, a trade line that’s reported may include information such as your available credit, the amount owed, the terms of the account, recent activity and when you pay, relative to your due date.
You could have a business credit report without any trade lines, but it may be hard to build business credit without any. This is because your number of trade lines and your payment history may be factors in your business credit file.
Here’s where you need to watch out: Not every vendor will report your payment activity. So even if you always pay your vendors early or on time, you may not be building your business credit.
If you’re trying to boost your business credit, you may want to start opening business trade lines or accounts, such as a business credit card, with companies who report to the business credit reporting bureaus.
Just be careful about opening an account with an annual fee, as you don’t want to have to pay just to keep an account open and you may be able to find more cost-effective options.
You may also consider opening term accounts with suppliers who will report your activity to at least one bureau. You can ask the vendor if and who they’ll report your payments to before opening an account to ensure it’ll help your credit.
4. Pay on time — even better, pay early.
Your payment history with vendors, lenders and credit card issuers is an important factor in your business credit score. In fact, making on-time payments may be just as important with your business accounts as it is with your personal accounts.
“If you’re late by just a few days, those late payments may show up in your business credit reports,” Hanson warns. “With personal credit, a late payment may not be reported to the credit bureaus until you fall behind by 30 days.”
Paying early could be beneficial as well. “With some business credit scores, such as the Paydex® score provided by Dun & Bradstreet, to get higher than an 80 (out of 100), you need to pay your bills early,” Hanson adds.
5. Keep working on your personal credit.
We’ll be the first to admit that the relationship between business credit and personal credit can be a little confusing.
On one hand, personal and business credit reports rely on different information and can be completely separate.
On the other hand, it’s becoming increasingly common for business credit scores to rely on blended data that integrate the business owners’ personal credit.
Still confused? Think about it this way: It’s generally a good idea to assume that your personal credit matters for business, especially if you’re a sole proprietor or just starting out. If your personal credit isn’t quite where you’d like it to be, you may want to review a few ways to build your credit from scratch.
Your personal credit could be hurting for a variety of reasons, but don’t let that hold your business back.
Start building your business credit now, so it will be established if you ever need it. Even if you don’t plan on taking out a loan, keep in mind that business is unpredictable by nature. You never know when you could benefit from a rock-solid business credit score.
Reader question: “We will be purchasing our first home in early 2020. My question has to do with the home inspection and offer process, and the timing of those two things. Does the home inspection usually happen before or after the offer is made to the seller?”
The short answer: While the home buying process can vary from one buyer to another, it usually follows a certain series of steps. In most cases, the inspection happens after the offer has been accepted by the seller. This is a logical sequence of events for both the home buyer and seller, and you’ll soon see why.
The Inspection Usually Happens After the Offer
It’s entirely possible to inspect a home before making an offer to buy it. You would just need permission from the homeowner / seller, in order to schedule the inspection and give the inspector access to the property.
But that’s not how it works in a typical home buying scenario.
In most cases, the buyer’s inspection will take place after they have made an offer and the seller has accepted it. We will examine the reasons why this makes sense in a moment. But first, let’s take a look at the steps that occur during a typical home buying scenario.
Here’s the typical sequence of events:
The home buyers get their financing lined up and begin the house hunting process.
The buyers find a property that meets their needs and also falls within their budget.
They make an offer to purchase the home, using a standard real estate purchase agreement document. In many cases, it’s actually the buyer’s real estate agent who submits the offer to the seller.
The seller accepts the buyer’s offer, agreeing to the price and other terms that were written into the contract
The two parties will then sign the real estate purchase agreement, and the deal moves forward.
At this point, home buyers often schedule an inspection to learn more about the true condition of the property they’re buying.
Those are the basic steps that lead up to the home inspection process. And you’ll notice it happens after an offer has been made and accepted — not before. It makes sense to handle the steps in this order, for both the buyer and the seller. So let’s look at it from both perspectives.
Advantages for the Home Buyer
As the buyer in a real estate transaction, you will be the one paying for the home inspection. They typically cost somewhere between $300 and $500, on average.
You wouldn’t want to spend that kind of money unless you were sure the seller was going to accept your offer. That’s why it makes sense to make the offer first, and then coordinate the inspection afterward.
Having the home inspection take place after the offer – and before the closing process – also gives the home buyer a chance to back out of the deal in some cases. We’ve covered this topic before. Here’s a quick recap:
When buying a house, you have the opportunity to write certain “contingencies” into your purchase offer. (Here’s an article that explains the different types of contingencies.) Basically, they give you a way to back out of the contract if a certain situation or condition arises, such as an unsatisfactory home inspection.
But this kind of “contingency clause” must be written into the contract at the start. This is another reason why it’s logical to conduct the inspection after the offer is accepted.
From the Seller’s Perspective…
In a typical real estate purchasing scenario, the homeowner won’t allow the inspection to take place until after they’ve accepted the offer. And it’s easy to understand why, if you put yourself in their shoes.
The home inspection is somewhat invasive for the seller. In most cases, the sellers will leave so that the inspector can do what he needs to do uninterrupted. They also have to grant the inspector access to the house.
Most sellers will only go through this process once they have accepted what they feel is a reasonable offer from a buyer. If they reversed the process, and allowed for a home inspection before the offer, they might be having an inspector examining their home for no reason. Maybe the buyer comes in with a low offer, which the seller then turns down.
In that case the whole home inspection process was a waste of time for everyone. (Not to mention being a waste of money for the buyer.)
It’s also important to realize that home inspections are not mandatory. At HBI, we strongly encourage buyers to have a property inspected before purchasing it. That’s the best way to learn about the true condition of the property. But they’re not required by law. You could make an offer to buy a home and skip the inspection, if you wanted to.
But if you do choose to have one, there’s a good chance it will take place after the offer — not before. We talked about the reasons why. It makes sense from both the buyer’s and the seller’s perspective. You negotiate the offer first, get a signed contract, and then proceed with the home inspection, appraisal.
“It’s like if you were to read academically about football and then go out and try to play football,” Whitlow told HuffPost. “The act of reading about and playing it are two different things.”
That’s why it’s important for families to speak openly about finances when possible ― like their budget, for example ― to encourage questions from their kids and to set them up to be better prepared in their financial future. This means taking a minute after swiping your debit or credit card to explain that the little thing in your wallet is not the source of limitless money.
Whitlow also noted that money conversations with kids are opportune times to discuss the difference between “what you need to have to function in life and what you want to have in life.”
“We’ve made money into a foreign language. 401(k) and 529, those are tax code language, and why would we expect the average person to understand the tax code language?”- TANYA VAN COURT, CEO AND FOUNDER OF GOALSETTER
Van Court wasn’t taught financial basics as a kid, so she made sure to introduce it to her own children. To help other families do the same, Goalsetter offers an Urban Financial Dictionary that explains financial terms and associates them with movies, TV shows, song lyrics and more.