Illinois Estate Planning & Elder Law Blog

Home Equity Lines of Credit allow you to get cash from the equity you have in your home. Most lenders look for a cushion of 30% equity already in the home before they will consider allowing the homeowner to borrow against the home’s equity. With house values declining, some homeowners can’t meet this 30% requirement. Other homeowners find they have little in excess of this 30% requirement available to borrow against.

The rates offered by lenders for Home Equity Lines of Credit are not as attractive as they used to be. Earlier, the rates were the prime rate (the interest rate banks offered to their best corporate customers) minus one percent. Today, the rates charged are often the prime rate plus two percent.

Home equity is a consideration for estate planning. It is a major asset and in many cases the largest assets in an estate. Careful consideration needs to be given before a decision is made which will affect home equity in the short term and the long term.

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Estate planning involving inherited Individual Retirement Accounts (IRAs) can be tricky. Inherited IRAs are different from other IRAs. Only an IRA inherited from a spouse can be rolled into your own IRA. Also, IRAs inherited from different people can not be consolidated into one account.

If you take assets from an inherited IRA and deposited them in your own IRA, all of those inherited IRA assets will be taxable. In addition, you will have to remove any assets you deposited from the inherited IRA which are above your allowed IRA contribution for the year ($5000 if you are under age 50 or $6000 if you are 50 or older) or you will incur further penalties.

It is important to get the titling correct not only on your statements from the IRA custodian, but also on the records your IRA custodian provides to the IRS.

The advantage to retitling the inherited IRA is that you can extend withdrawals from the IRA the length of your lifetime instead of having to withdraw the assets sooner. With an inherited IRA you must make withdrawals every year beginning by December 31 of the year after the original owner’s death.

If you are not happy with the original custodian or investment, you can use a trustee-to-trustee transfer to move the IRA account to another financial institution provided the current IRA custodian allows it.

Continue reading "Titling Inherited Individual Retirement Accounts" »