Did You Know?

A will can be challenged in court if there are doubts about its legality. It is the executor’s responsibility to find the will and prove that it is valid. But you can also figure out if a will is valid or not. Each US state has its laws concerning wills. You must know the laws of your state.

Requirements Of A Valid Will

There are four basic requirements for a will to be valid in almost every US state.

It Must Be In Writing

The will must not be oral; instead, it should be written on paper. A typed or printed will is also legal.

It Must Be Signed And Dated

The will must bear the signature of the will-maker and the date when it was signed. The latest will is considered, declaring all the previous wills to be void.

The Will-Maker Must Be Competent

The will-maker must have the testamentary capacity to sign the will, i.e. the maker must be aware of its implications and nature and free of any influence.

Witnesses Must Sign It

A legal will also bear the signature of two adult witnesses who are mentally competent. In Colorado and North Dakota, you need a notarized will, not a witnessed one.

Exception

In most of the states, a will handwritten and signed by a will-maker is also acceptable.

Power of Attorney is a document that bestows power on another person to act on your behalf. You appoint an agent through a document to carry out a particular activity on your behalf. The power can range from carrying out the sale of your home, taking business decisions for you in another city, or taking care of your assets.

A power of attorney confers a temporary or permanent authority to another person. It is a written document signed by both the principal, who is conferring the rights, and the attorney, who is so appointed.

The reason for appointing a power of attorney can be numerous. If one person cannot close the transaction or carry out an activity due to physical issues or other reasons, appointing a power of attorney comes in very handy. If you cannot manage your affairs, sometimes courts interfere and appoint a guardian, conservator, or executor for you.

Laws Concerning Power Of Attorney

Every US state has a different law regarding power of attorney. But the basics have been covered above. You can learn about the laws of your state of residence and appoint an attorney accordingly. However, if you move to another state, it is recommended to update your power of attorney.

As per the U.S. legal system, every real estate title holder possesses a bundle of rights that are transferred to the titleholder when they purchase the property.

The bundle of rights includes-

• Right to possess the property
• Right to control it
• Right to derive income from it
• Right to exclude
• Right to dispose

With these rights come certain duties, non-fulfillment of which may forfeit one or more rights.

These rights are explained below-

Right Of Possession

As soon as the holder completes the payment, the title gets transferred to his name. In the case of financing, the possession takes place before payment completion.

Right Of Control

The real estate title holder can control how they use their property in adherence to local and state laws.

Right To Derive Income

The titleholder has the right to derive income from their property by renting it out, leasing it, or carrying out a business in the property if the laws permit them to do so in that area.

Right Of Exclusion

The titleholder can exclude people from trespassing on the property.

Right Of Disposition

The title-holding entity can make decisions regarding the transfer of ownership.

These are the rights that a real estate title-holding entity possesses.

People often use title and deed interchangeably, but there is a significant difference between both.

Real Estate Title

The title refers to the ownership of a property. When you hold a real estate title, you hold the rights and responsibilities related to that property. A title can be shared by two or more persons, corporations, trusts, companies, and other legal persons as per the law.

Property Deed

It is the physical document signed by the property seller and the buyer. The signing of the deed confirms the transfer of title. To transfer a title or to share it, you need a signed legal deed.

Differences Between A Title And A Deed

The physical aspect of the two terms is the biggest difference between both. The title is a concept, while the deed is its tangible proof. The title is the ownership, while the deed is the proof of that ownership. One cannot find a title in the record, but the deed, stating the title.

A clear understanding of the two terms can be very helpful when buying real estate for the first time. You can also take the help of the real estate agent you hire.

When you mortgage property and take a loan against its value, it is called a mortgage loan. A mortgage loan is to be repaid along with interest. This interest rate is called the mortgage rate. It is a certain percent of your total loan.

Mortgage rates play an important role in determining your liability and choosing among the lenders. The mortgage rates vary between the 2%-5% range. But it also depends on your past credit history and your ability to repay your loan. 

Why mortgage rates are so important can be understood by an example. Say, if you avail a loan of $300000 at 3% per annum, your interest cost for 30 years on a fixed-rate mortgage comes around to $270000. If the same loan is available from another lender at 3.5%, the interest cost comes around 315000, costing you $45000 more.

While choosing the lender, you must compare more than a few lenders based on the rates they are offering, the loan-to-value ratio they are lending, and the assistance they are offering.

You need to mindfully figure out the mortgage rates you are being offered and choose the best lender. The skepticism initially can save you from the costly loan and inconvenience later.

It becomes easy to choose the right type of mortgage loan if you know their different types. Two major types of mortgage loans are discussed here-

• Fixed-Rate Mortgages
• Adjustable-Rate Mortgages

Fixed-Rate Mortgages

A fixed-rate mortgage is one where you pay a uniform rate of interest for the entire loan term. For example, you have availed mortgage at 4% interest, so you will pay 4% on your loan amount. The fixed-rate mortgages are often long-term such as 15 years, 20 years and 30 years. The biggest advantage of the fixed-rate mortgage is that you can make a budget as you are aware of a fixed monthly expense.

Adjustable-Rate Mortgages

Adjustable-rate mortgages are ones where the rate of interest is not fixed. It keeps fluctuating with the market conditions, and the borrower can take advantage of it sometimes, while sometimes it causes a problem to the bottom line. It can be beneficial if the interest rates fall, but f they increase, your monthly expense can become affordable.

To enjoy maximum savings on the interest, you must talk to your lender and learn about the overall cost of borrowing under both types of mortgages. If availing ARM, do discuss the average possible hike in interest.

Health and life insurance serve two different purposes, and both insurance types are important for an individual. While young people believe that they don’t need health insurance, it is not true. Yes, paying for both health and life insurance can be expensive, but both are important. Affordable Care Act, 2014 have made insurance affordable, so now you can protect your family at a much lesser monthly cost.

Health Insurance

Health problems don’t knock. So, for an unexpected visit to doctor’s, hospital stays, medical expenses, medicines, tests, etc., you need health insurance that covers all these costs.

Life Insurance

When a person dies a premature death, the family loses a beloved member, and sometimes, the bread-earner. To compensate for the financial loss, life insurance coverage offers a lump-sum amount after the individual’s death, so you don’t have to struggle with both emotional and financial loss. It covers funeral costs, any outstanding medical expenses, and other costs.

The major difference between both insurance types lies in the expenses they cover. While Life insurance pays a lump-sum amount on death, health insurance covers the medical costs you were not ready for.

Insurance is not a luxury, it’s a need. If you have a family, you must buy both of the insurance.

If you are a US resident and you have a car, whether leased or owned, you need car insurance mandatorily. 49 out of 50 states of America require you to buy auto insurance. If you are wondering why, here are the reasons.

To Compensate For The Loss

Your car can cause both physical and property damage. If you are driving on public roads and you cause an accident, you must compensate the financial loss to the victim.

To Compensate For Negligence

If you are required to buy the insurance, but didn’t, the victim can obtain a court judgment against you, which can be very troublesome. If you have insurance, the other party can claim their expenses from the coverage.

To Ward Off Financial Uncertainty

If you are not financially capable of compensating for a loss, but have auto insurance, you can easily compensate the victim from the coverage.

Do All States Require Auto Insurance?

The only state where you don’t mandatorily need any auto insurance is New Hampshire. But it applies if you can prove that you are financially capable of compensating any losses you might cause.

State governments cover the auto insurance laws. To know more about your state, you need to consult the state DMV department.

When all your assets are combined, and your liabilities are deducted from the sum, it is your net worth, a brief of what you own and how much you are worth. Net worth can be calculated for individuals, businesses, corporations, etc. But what constitutes your net worth as an individual is essential to know. It serves various purposes.

The constituents of net worth are-

Assets

• Cash
• Jewelery
• Saving and Checking Account Balance
• Investments
• Real Estate Property
• Vehicles In Your own or Joint Name
• Retirement Funds
• Life Insurance Policy
• Any other assets
• Any interest in A Business
• Artistic sculptures, paintings, drawings, etc.
• Furniture

Liabilities

• Mortgage
• Credit Card Bills
• Student loans
• Car Loans
• Outstanding Taxes

To arrive at your net worth, you deduct all your liabilities from the total of your assets. Net worth is prepared at a point of time, not for a period. It includes all your financial and non-financial assets.

It represents that if today, all your liabilities are discharged using your assets, what will be left. It gives the lender an idea if they can lend you more money and if you are financially able to discharge it. You can also use it for future investments and planning.

If you are a small business owner, you will be amazed by the types of loans available to you. You can navigate through various loan products and obtain the one you need for your specific needs.

The different types of business loans for small business entities are as follows-

• Business Line Of Credit
• Small Business Administration (SBA) Loan
• Term Loan
• Merchant Cash Advances
• Commercial Real Estate Loans
• Personal Loans For Business Purpose
• Equipment Financing
• Microloans
• Invoice Financing
• Business Credit Card
• Startup Loan

These loans differ from each other in the ways they support your business as each of these has a different purpose and different interest rates.

When making a loan application, you must consult an expert and learn about your loan options. There is a different loan for a different need. Even if your loan application gets rejected once or twice, don’t get upset. It happens all the time with small business loans. But you can identify your need again and make a new application.

Read about all these loan products in detail and choose what’s best for you.

Whether you plan to buy your dream home or invest in a property, the question always looms whether it is the right time to invest in real estate. You will find your answer here.

Market Condition

The condition of market plays an important role here. The best time to buy a real estate property is when the demand for property is low, but the inventory is high. Post pandemic, certain properties have witnessed huge demand drops, such as restaurants, hotels, offices, etc. If you are looking for an investment, you can consider these properties.

Ready Capital

The best time to invest in real estate is when you have ready cash to complete the purchase or when you have financing options available. The amount of capital you have also help you decide if you should choose a low-cost investment or buy a large property.

Knowledge

Knowledge about the real estate market is also important. You must follow the real estate news; look at market trends and favorable predictions to make your next move.

There is no perfect time for real estate investment. It’s all about an opportunity that doesn’t come your way. You need to look for it. So, find your opportunity today.

Availing of a personal loan is easy if you are eligible and have all the documents ready. The personal loan requirements are discussed here, which you must know if you are planning on taking one.

Income

You need an income to pay off your loan. The lender needs proof of income to ensure that you are able to repay the amount in time.

Credit Score

Your credit score is the first thing that every lender considers at first. It is a score based on your past loans, your repayment history, present outstanding, etc. Your credit score must be 750 or more to qualify.

Debt-To-Income Ratio

This ratio represents how much monthly income of the borrower is used for the payment of existing debt. It is calculated to assess the borrower’s repayment capability. It is calculated as a percentage of income.

Collateral

For a secured loan, you need to pledge a collateral property. It can be your house property, vehicle or other assets.

Processing Fee

The borrower bears the loan processing expenses. These expenses lie from 1% – 8% of the loan. It is not a requirement for qualification, but this expense is deducted from your loan amount.

If you fulfill all these requirements, you can avail of the loan after presenting the required documents.

If you are an investor and real estate is your forte, you can save a large amount of taxes if you are aware of these five tax benefits.

FICA Tax

If you earn any rental income from your property, it won’t attract the Social Security and Medicare Tax of 15.3%.

Depreciation

Every property wears out over time. Therefore, you can claim a depreciation deduction on your properties and save taxes as it is considered a net loss on your investment.

1031 Exchange

If you exchange your real estate property for another similar property, which qualifies for the exchange, you can enjoy tax benefits, as an exchange is not covered under capital gains.

Opportunity Zone Funds

Investing in Opportunity Zones which include rural and financially stressed areas, you enjoy a tax incentive under Tax Cut And Jobs Act 2017. It allows you to defer your capital gain tax by utilizing it for another property.

Passive Income And Pass-Through Deduction

Your rental income from the property is passive. Earlier, there was no pass-through deduction. The Tax Cut And Jobs Act, 2017 made it eligible for pass-through, which is limited to-

20% of net rental income, or 5% of the cost of property+25% employee payroll expenses

 This deduction is only allowed up to 2025.

These are the tax benefits you enjoy when you invest in real estate.

If you are a beginner investor and planning to invest in US stocks, you must know these basic things about the market and stocks.

The Company Is Growing

Before you invest in a company’s share, do your research. Look at the past dividends paid by the company, earning per share (EPS), market value of the company, etc.

Compare The Growth

Look at the industry as a whole and see if the company is performing better than its peers. An assessment of the company can help you understand its actual position in the market.

Calculate Price-Earnings Ratio

The price-earnings ratio is an indicator of a company’s earnings to its stock price. It is calculated by dividing EPS by the company’s market price. Thus, it reflects the company’s worth in the market.

Look At Dividend Distribution Trends

A company that is increasing dividend payout in conformity with its growth is good. If a company is paying high dividends, it is trying to attract investors and not investing in itself.

Check The Debt-Equity Ratio

Every company’s balance sheet shows debt, but it should not exceed the accepted industry norms. It is derived by dividing total company debt by total equity. Thus, it indicates the company’s ability to pay off its loans.

Wrap Up

There are several things that you should consider before making any investment decisions. The above points are some of the most important ones.  

An Asset protection Trust is important for those with high liability, such as professionals or business owners who want to protect their assets from creditors. In an unwanted situation, the creditors may get a court judgment against you, which can cause you to sell your business assets and pay off the creditors.

Thus, an asset protection trust is established by the beneficiary outside the US, which looks after the beneficiary’s assets. Generally, the Asset Protection Trust has the following features-

• It is based outside the US in an office from where the trust protector overlooks the assets.
• It contains a distress clause that causes the trustee to surrender the assets to the creditors if they obtain a court judgment against the beneficiary.
• It contains the flight clause, which stipulates that the trustee is entitled to shift the trust’s jurisdiction from one place to another if there is a possibility that the creditors can claim the property.

It is a safeguard against creditors. But it is not common in the USA. 4 states have passed qualified statutes that offer generic protection to your assets. Some of these states are Ohio, Nevada, and South Dakota.

Derivatives, as the word suggests, is a contract whose value is derived from another asset. Two parties enter into a financial contract, where one party is a seller, and another is a buyer. The seller agrees to sell an underlying asset at a specific price to the buyer on an agreed date.

Generally, the asset under a derivatives contract is a commodity, such as oil, crops, gold, etc. There is no tangible purchase and sell involved in this contract. The seller doesn’t own an asset, and the buyer doesn’t take any physical delivery.

Let’s understand it by an example. Today, gold is trading at 57USD. The seller agrees to sell a stipulated quantity of gold at today’s price after three months. However, suppose the price increases to 60USD, the buyer and seller will be bound to settle the contract at the agreed price. Thus, even if it will be beneficial for the seller to sell it at a high price, he is bound by the contract.

These contracts are very beneficial for large companies, who trade in various commodities regularly. Derivatives are traded over the counter and on national exchanges. It is safe to trade derivatives via exchanges approved by the federal system and offer transparency.

A Limited Liability Company or LLC is a business structure that has been created by the fusion of partnership firm and LLP. It differs significantly from partnership firms on various points. The most significant one is the liability of the partner.

In an LLC, the company is a separate entity from the partners. Therefore, the liability of the LLC does not extend to the personal property of its partners. Unlike partnership firms, the partners of an LLC can participate in the organization’s day-to-day management, but their liability is only limited to their capital share. So, if a creditor sues the company, the liability of the company shall be fulfilled from the company assets and not partners’ assets.

LLCs are subject to state laws, and their regulations vary state wise. For example, some states allow even organizations and companies to become partners in the LLC while others only allow individuals. Delaware is the most popular state in terms of LLC in the US, where most of the newly formed organizations are LLCs.

LLCs are created to limit partners’ liability, and it satisfies the purpose successfully.

When you are establishing a business, the first thing to decide is the entity structure. For a small business, the choice is simple. You can create a sole proprietary firm. But when you have bigger plans, both LLC and corporations are worth considering.

You can choose one based on the differences between both structures.

• LLC is a pass-through entity. Its profit is passed to its members, where it is taxed in their hands. Corporations are taxed separately. A corporation files its return in its own name.
• A corporation is owned by shareholders while partners own the LLC.
• The corporation cannot distribute its profit freely to members, i.e., shareholders. Instead, they are paid a dividend based on their shareholding. On the other hand, an LLC can freely distribute its profit to its members, without considering their capital contribution.
• A corporation is managed by the Board Of Directors who are qualified to overlook the management. In an LLC, there is no distinction between partners and owners. The members of LLC manage the day-to-day affairs of the company themselves.
• The formal reporting requirements of a corporation are much stricter than an LLC.

These are major differences between LLC and corporations. Based on your business plans, convenience, and goals, you can choose the desired entity structure.

Whether you are a business owner, a professional, or owner of large family wealth, you need wealth protection strategies in place. Here are some reasons why wealth protection is important.

To Protect Your Family Interest

The future is uncertain. What if something happens to you? Those who are financially dependent on you need financial protection. Having wealth management strategies in place ensure that your family is financially protected with you and without you.

Legal Action

Whether you are a businessman, or professional or in the middle of a bad marriage, one lawsuit can take away all your wealth from your hands if they are not protected. No matter how good a businessman you are, sometimes circumstances don’t allow you to pay off your creditors on time. In such a situation, creditors eye your wealth and try to recover their debt, which they can snatch from your wealth. Medical and law professionals are amongst the most sued professionals. If you are one among these and want to protect your wealth, you need proper wealth protection strategies in place.

Taxation

You must not spend your hard-earned wealth in paying different taxes. Therefore, you need effective tax planning to save you from unnecessary taxations.

Conclusion

There are several circumstances that can disturb your peace by threatening your wealth. Take expert advice and protect your wealth in the best possible manner.

A nasty divorce can result in an empty bank account for you and a newly created wealth for your partner. The first step to protect your assets during a divorce is to sign a prenuptial agreement. But if you don’t have a prenup in place, you can protect your assets in the following manner.

Divide Your Assets

Take out all your assets, such as saving and checking accounts, properties, investments, etc., and clarify what’s yours.

Open A Separate Bank Account

If there is a risk that your partner will leave you high and dry without any cash, separate your bank accounts and transfer your money to your account.

Go Through State Laws

Divorces are subject to state laws, and every state has a different law regarding divorce. You must know whether you live in an equitable distribution state or a community property state.

Hire An Experienced Lawyer

A lawyer is your representative in the court. You must hire an experienced divorce lawyer who can protect your assets and help you win the case.

Decide What You Need

If your lawyers are trying to get a settlement, state your terms clearly about what assets you want and what financial aid you need to maintain your standard of living.

Conclusion

To protect your assets in the best possible manner, you need a financial expert and an attorney to help you out.