More Real Estate Investment Opportunities Coming to Birmingham Area

Birmingham Initiative Seeks to Provide New Opportunities for Real Estate Investors In Opportunity Zones

The Tax Cuts and Jobs Act, signed into law by President Trump in December 2017, created Opportunity Zones to spur investment in distressed communities and in rural low income and urban areas throughout the country. New investments in Opportunity Zones can receive preferential tax treatment. The opportunity zones are delineated by local government officials and approved by the Treasury Department.

Pursuant to the Act, 24 opportunity zones were nominated in the Birmingham area by Governor Kay Ivey and certified by the Department of Treasury in 2018. These 24 opportunity zones cover 77 of Birmingham’s 99 neighborhoods. According to a recent article in the Birmingham Times, Birmingham Mayor Randall Woodfin recently announced the creation of the BIG Partnership, a new initiative that seeks to further advance and incentivize investment in the communities within Birmingham’s opportunity zones. The recent article on the announcement can be found here.

Among the many projects to be provided by the new initiative will be an educational campaign that will educate local residents on the opportunity zones.

To learn more about Birmingham’s opportunity zones and how we can help you get started in real estate investment, contact us today.

Funding Your Living Trust

Hopefully by now you’ve heard about the benefits of having a living trust as part of your estate plan. The most notable benefit is the ability to keep your assets from having to go through probate. You can retain control of assets during your life, and exercise control over how they are managed and used after your death. A trust can reduce, and in many cases eliminate income, estate, and capital gains taxes on assets.

Meeting with a skilled estate planning attorney and creating the best type of trust for your particular needs is a big step. Creating the trust, however, isn’t all you need to do. Consider how silly it’d look if you bought a safe deposit box or opened a bank account, but never put anything in it. They can only protect your assets if they’re inside. If you die or become incapacitated and your trust is not funded, it is mostly useless, no matter how well-drafted it might have been.

How to Fund a Living Trust

So how exactly do you go about funding a living trust? That depends on the nature of the assets intended to be placed in the trust. Many types of assets can be used to fund a trust by re-titling them in the name of the trust.

For instance, if your name is John Doe and you currently have a bank account or cars in your sole name, you could change the name on the bank account or vehicles to that of the trust, with yourself listed as trustee of the trust. Also, if you are married, you and your spouse can both be listed on an account as co-trustees.

Other assets that can be re-titled in order to fund a trust are real estate, stocks, and other investment accounts. Legal requirements for funding a trust with real estate are somewhat complicated, and it is best to have an attorney’s assistance to make sure you use the right type of deed and that it is properly prepared. More likely than not, you will deed the property directly to the trust.

Certain types of assets may be used to fund a trust by designating the trust as the beneficiary of those assets. Many of our clients choose to make their trust the primary beneficiary of their life insurance policies. This allows the client to have lots of control on how the policy proceeds are disposed of at the death of the policyholder. Annuities or retirement accounts, including 401(k), 403(b), and IRAs can also fund a living trust after death through beneficiary designations.

Having retirement account assets payable to certain trusts can significantly reduce the tax deferral period for your taxes. On the other hand, other trusts can enhance the likelihood of attaining the maximum stretch-out period for your heirs. At the Law Office of Rodney Davis, LLC, we can assist you in re-titling your accounts to avoid a bad outcome.

Getting the Help You Need to Fund Your Living Trust

If you have not yet had your attorney draft your trust, prepare a list of the assets that you want to place in the trust. Understanding how you plan to fund your trust will help your attorney guide you in doing so efficiently. If you have created your trust, but have not yet funded it, don’t delay, act now! Call our office today to learn how you can fund your living trust. 

Can I Put My Home in a Trust?

The short and simple answer is yes. Any property you own and have legal title to can be transferred into trust. That includes real property. Even real property that is subject to a mortgage can be placed into a trust. Most people, after all, don’t own their houses free and clear of a mortgage when putting their homes into trust. But transferring real property into the trust does not change your obligation to continue to pay the mortgage–if you don’t pay, they can still take back the house. In fact, if you’re thinking of putting your home into trust you should consider contacting your lender first. You might trigger a due on sale clause if one is included in your mortgage contract. The lender can call the entire mortgage due all at once because you technically no longer own the home. Further, if after placing your home into trust you decide to refinance your home the lender may require that you take your home out of trust before getting the new loan and putting it back into trust after getting the new loan.

Advantages of Putting a Home into Trust

Homestead Exemption Issues 

If your line of work leaves you vulnerable to lawsuits you may want to consider your state’s homestead exemption laws. These laws put your house – or at least a portion of its value – out of reach of judgments or, in a worst-case scenario, your bankruptcy estate. When it comes to trusts, homestead laws can vary significantly from state to state. In some states, your property is only protected if you personally hold title. If you transfer ownership of your house to an irrevocable trust, however, this shouldn’t be a consideration. This type of trust also shields assets from creditors, so you’d just be exchanging one form of protection for another.

Avoidance of Probate Issues 

Most living trusts are structured to avoid probate and its costs. While some states have streamlined their probate process, many still require cost, time and attendance at multiple hearings. Most homeowners wishing to avoid probate and transfer title to their home to their heirs quickly find avoiding probate through a trust to be a strong advantage.

Consider the Deed Used to Transfer the Home into Trust 

The deed you use to transfer your property to your trust can present another issue. Real property can be transferred by two main instruments: a warranty deed or a quitclaim deed. A warranty deed guarantees a future buyer that there are no hidden liens or claims against your property, and that you – or your trust – actually own it. Thus, you have something to sell. A quitclaim deed, on the other hand, makes no such representations. It simply transfers any ownership interest you might have without guaranteeing that you have an interest or that it’s not encumbered by liens. A future buyer would be wary of this type of deed if your trustee finds that he must sell the house after your death. Depending on the type of deed you use to make the transfer to your trust, you could create a big estate issue in the process of settling your estate at your death.

For more information about how we can help with your estate planning needs please contact our office today!