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6 Dos & Don’ts When Counting Household Assets
When calculating household income at initial certifications and at annual recertifications, if you have a mixed-income site, you must properly count the household’s assets. This can be tricky if you’re not familiar with HUD’s rules.
To help you avoid problems, here are 6 Dos and Don’ts to follow each time you certify and recertify low-income households at your tax credit site.
1. DON’T Assume All Items of Value Are Assets
You must consider only those items that HUD says are assets. Generally, HUD considers an item to be an asset if it has value and may be turned into cash—whether or not it produces interest or other income.
2. DO Count Only Assets that Household Members Own
The HUD handbook requires you to count only assets that households “effectively own.” So when household members report to you about their assets, don’t assume that they actually own these assets.
3. DON’T Count Lump-Sum Payments as Assets if Spent on Non-Assets
If a household gets a lump-sum payment and then spends it on something that’s not considered an asset, such as a family vacation or school, you mustn’t count that as an asset. But if they put a lump-sum payment into a checking or savings account, a CD, stocks, or bonds, you would treat them as assets.
4. DO Ask Household Why Asset Disposed of for Less than Fair Market Value
Generally, if a household has disposed of an asset for less than its fair market value in the past two years, you must count it as an asset at the household’s initial certification or annual recertification.
5. DON’T Count Amount of Term Life Insurance
If you learn that a household member has term life insurance, don’t count the amount of the insurance as an asset. You would count whole or universal life insurance.
6. DO Count Accessible Retirement Account Balances Unless Periodic Payments Are Made
If a household member has an IRA, Keogh, or other retirement account, you must count the account balance as an asset as long as this balance is accessible to the household member…unless the benefits are being received through periodic payments.
For more information on this and other related topics, visit www.VendomeRealEstateMedia.com and click on Tax Credit Housing Management Insider to sign up for a free issue.