FACTS THAT SOME PEOPLE DO NOT KNOW:
Home Equity Loans: They are fine loans to use when money is needed, and when there is equity in the old “homestead”. As you know, they should not be used as an ATM machine for there is always a reckoning. One item that many people ignore. Most HELOC’s have a “draw” period of ten years. Translated: At the end of ten years the interest only payment period ends, and the payment increases greatly to cover interest and equity normally on a 20 year amortization rate.
Gift Taxes: Each taxpayer can gift $14,000 each year to anyone. Couples could give $28,000 to each of their 24 grandchildren, for example, and no problem on taxes for either party. The $5M plus exclusion is for death taxes or for gift taxes during your lifetime. Therefore, you could gift $1M to one grandchild with no tax issues, but you would only have a $4M plus exclusion at time of death. Estate or Death taxes will not affect a vast majority or even a majority of taxpayers, but Probate costs can run high so get a living trust before it is too late.
Basis in your property: Whether you realize it or not, any home or rental property has a “basis”. At time of sale your profit is calculated simply by subtracting basis from your Sales Price minus Selling Costs. Your home basis is for most people what you paid for the property plus improvements. Rental basis is similar except you subtract any depreciation taken. When you gift a real estate property to someone, the basis follows the gift. Assume I have a property with a basis of $100,000 and a value of $600,000. I gift, recipient sells, tax. When I die, basis goes to fair market at time of death, recipient sells, no tax. Basis can be difficult to calculate if you inherited a property, converted a rental to your home or vice versa, had some insurance payments to you, etc. See a professional accountant who specializes in Real Estate Accounting.
ARE YOU READY TO VOTE ON NOVEMBER 8TH, CONSIDERING 17 STATE PROPOSITIONS? Some of the topics to cover:
Reconsidering full legalization of marijuana.
Repeal the death penalty or speed up the death penalty.
New taxes on the wealthy and on smokers.
No more large-capacity magazines in California.
Yes or no on plastic bags and redirecting fees to environmental programs.
$9B in school bonds for construction, etc on K-12 and community colleges, and votes will be required for revenue bonds bigger than $2B.
Prescription drug pricing limits for state agencies (note; pharmaceutical industry has $50M for an opposing campaign so you will hear lots about this one, surprise)
Adult films: should they use condoms or not?
Medi-Cal funding: Harder to divert funds by the Legislature that are for Medi-Cal programs.
Criminal sentencing: More prisoners serving time for non-violent could get earlier release, and new law concerning juvenile offenders about adult courts.
Repealing the ban on bilingual education if county offices of educations or school districts make that decision.
Should California officials work toward appeal of Citizens United SCOTUS decision? This would require an amendment to the Constitution. Not easy. This is only an Advisory, no specifics.
Increase transparency in the Legislature: Abolish the practice of last minute amendments and expand use of live video in the legislature.
Many people are involved in pushing these measures: Gavin Newsom, Facebook’s Sam Parker, Mash’s Mike Farrell, NFL Vet Kermit Alexander, Tom Steyer, Teachers Assoc., Michael Weinstein, Sam Blakeslee, Charles Munger, Jerry Brown. Good reading, good listening, good discussions, etc.