Boomerang Kids: 85% Of College Grads Move Home

According to new statistics, there is a new group of kids in town: the boomerangers. They are college graduates who move back home because of extreme unemployment rates among their age group. Nearly 15% of taxpayers between the age of twenty and twenty-four are unable to find employment. According to CNN Money:

"This recession has hit young adults particularly hard," according to Rich Morin, senior editor at the Pew Research Center in DC.

So hard that a whopping 85% of college seniors planned to move back home with their parents after graduation last May, according to a poll by Twentysomething Inc., a marketing and research firm based in Philadelphia. That rate has steadily risen from 67% in 2006.

"It's peaking at levels we have not seen before," said David Morrison, managing director and founder of Twentysomething.

Mallory Jaroski, 22 graduated from Penn State University in May but has been living at home with her mother while looking for a job in press relations. "It's not bad living with my mom, but I feel like a little kid. I have a little bed, a little room," she says.

Jaroski thought she would stay for summer. But like many others, she's found her stay becoming significantly longer.

"There's almost an expectation that kids will move back home, there is no stigma attached," Morrison said. "The thought now is to move home for 6-12 months but in reality those young adults will be home for a year and a half or longer. Even if they have jobs, they are living at home."

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More Families, Friends Move In Together

From 2005 to 2009, American families took about 3.8 million extended family members in to their home to live with them. Due to financial strain, more and more households now have multiple siblings or family members living under one roof. New census data found that extended relatives now make up 8.2% of family households, up from 6.9% in 2005.

USA Today reports

Fueled by the dismal economy and high unemployment, more Americans — friends and families — are doubling up.

From 2005 to 2009, family households added about 3.8 million extended family members, from adult siblings and in-laws to cousins and nephews. Extended family members now make up 8.2% of family households, up from 6.9% in 2005, according to Census data out this week.

"Clearly, a big part of that is the economic recession and housing costs," says Stephanie Coontz, co-chair of the Council on Contemporary Families, a non-profit research association. "We're seeing a shift away from the 1950s and 1960s mentality against extended families," when "modern" women did not take in aging parents for fear of hurting their marriage.

There are also signs of a shift from family households. For the first time in more than a century, more than half of people aged 25 to 34 have never been married.

The number of people in non-family households — those whose members are not related — grew 4.4% from 2005 to 2009, faster than the 3.4% growth for family households.

"It's a realistic recognition that while a good, healthy nuclear family is a valuable thing to have, it's not the only family form people are going to live in all their lives," Coontz says.

Read more here

New Tax Tip Video: the Tax Incentives to Adopt a Child

Earlier in the week my team put together another episode in our tax tips video series. In the new video embedded below, host James Owens discusses the tax incentives to adopt a child. For more helpful videos, be sure to visit my YouTube channel.

Financial Literacy for Kids a Big Worry for Parents, BofA Says

According to Bank of America, financial management is the most important lesson a parent can teach their child. Although there are obviously many other important lessons parents teach their children, I do agree that financial literacy can help children lead a more stable life, and should be instilled at a young age.

The Merrill Lynch Affluent Insights Quarterly, which surveyed 1,000 Americans in June with investable assets of at least $250,000, found that 51 percent cited “financial know- how” as the most important life lesson to share with their children. That compares with 54 percent who named maintaining ties to family, 26 percent who said choosing the right spouse and 11 percent who mentioned staying physically fit.

“Cash and debt management, along with their children’s financial literacy, have become increasingly important to our clients as they juggle often competing financial demands while hoping to teach the next generation how to effectively manage their own money,” Dean Athanasia, head of banking and the direct investment division for Bank of America Global Wealth and Investment Management, said in a statement.

As uncertainty over jobs and long-term economic recovery increases, affluent investors are worried about rising college and retirement costs, the survey said. About 40 percent of respondents said they are concerned about the rising cost of college education and 46 percent are worried about their ability to preserve an inheritance for their children.

Continue reading at Bloomberg.com…

Dad Won't Pay For College, So Daughter Sues

When you read a headline saying a daughter is suing their parent for not paying their tuition, your first instinct is probably to laugh out loud. However, one Connecticut woman not only sued her Father for not paying her college tuition for her senior year, she also won! Read all the details in the NPR.org story below.

A woman in Connecticut sued her father for failing to pay her tuition for her senior year of college. She won.

Her dad had to pay $47,000, according to the Connecticut Law Tribune.

In a 2004 divorce, the father agreed to pay for the education of his three children. The daughter persuaded to him to sign a contract agreeing to pay for tuition as well as expenses such as books and car insurance.

The father paid for the first few years of the daughter's education at Southern Connecticut State University. But he refused to pay for her senior year, according to the article.

So the daughter took out a loan for $20,000 to pay for school, and sued her father for breach of contract.

The case went to trial. The father argued that the daughter failed to attend classes full time and didn't give him receipts for tuition other expenses. And, he argued, she dropped classes and kept the refunds for herself.

The judge didn't buy it. He ruled that the daughter "performed all of her obligations as set forth" in the contract, and that the father failed to prove his arguments.

The $47,000 payment includes the loan, interest, attorney fees and missed car insurance payments, the daughter's attorney told the Law Tribune.

How To Protect Your Family From Estate Tax Uncertainty

From Forbes.com:

An Illinois woman inherited just about $100 million this year. Estate taxes could consume 53%, 45%, 16% or none of it, depending on whether the federal and/or Illinois estate taxes--which both lapsed on Jan. 1, 2010--are reinstated retroactively. "It's wacky to have so many scenarios and not know what the tax is," complains Richard A. Lang, a Chicago partner of McDermott, Will & Emery representing the estate.

You're not crying for the heiress or her lawyer? Then consider another Lang client, a widow trying to divide her late husband's modest estate with the children from his first marriage without incurring ill feelings or big lawyers' bills. The husband's will was tied to the defunct federal estate tax. Now, by one legal reading the widow gets everything outright. By another, all the assets go into a trust that ultimately goes to the children, with the widow having access to the trust's earnings (and, if need be, principal) while she's alive. "This is going to be worked out," Lang vows.

Lots of families are living in similar estate limbo. Under the crazy terms of the 2001 Bush tax cuts, the federal estate tax expired on Jan. 1, 2010 and then springs back to life on Jan. 1, 2011, with only $1 million in assets exempt from a stiff 55% levy on all assets not left to a spouse or charity. Meanwhile, a long-standing provision, which "steps up" the basis of someone's assets to their market value at his or her death (allowing them to be sold immediately with no capital gains taxes due), has also lapsed for 2010.

President Obama and most Democrats want to restore the estate tax retroactively to its 2009 state--meaning $3.5 million per estate would be exempt, the tax rate would be 45% and all assets would get a step-up in basis. Republicans want a higher exemption and lower rate. When and how this gridlock will end is anyone's guess. After all, rational folks (including most estate planners) had assumed Congress would cut a deal before the tax expired. Complicating matters: Any retroactive tax is likely to face an epic court fight from rich heirs, perhaps including those of Texas pipeline tycoon Dan L. Duncan, who died in March with (we estimate) $9.8 billion.

Continue reading at Forbes.com…

Family Swindled By Madoff Fights $61 Million IRS Bill

From Forbes.com:

First the family of Norman F. Levy, the late New York City real estate tycoon, was swindled out of hundreds of millions of dollars by close friend Bernard L. Madoff, forcing the closing of two Levy charities. Then Levy heirs coughed up $220 million to the Madoff bankruptcy trustee to repay personal withdrawals made before Madoff's Ponzi fraud collapsed in 2008.

Now, adding insult to injury, the unlucky clan is fighting a $61 million estate tax bill from the Internal Revenue Service.

In a previously unreported U.S. Tax Court lawsuit against the IRS, Levy's estate and his two grown children, Francis N. Levy and Jeanne Levy-Church, contend they don't owe the $61 million. Instead, they claim the feds actually owe the estate a $19 million refund for losses from Madoff's thievery of certain assets after their father's death in 2005 at age 93.

Madoff, along with the Levy children, was initially named an executor of the estate. He has since resigned as an executor and is now serving a 150-year federal prison sentence after admitting he defrauded hundreds of investors out of an estimated $60 billion.

According to Tax Court and probate filings, Levy's gross estate was valued at $1.09 billion in 2005. Although some of that likely represented nonexistent wealth already looted by Madoff, Levy during his lifetime probably should have been on the Forbes list of the 400 Richest People in America, which he never made.