MONEY inversions

WATCH: Stephen Colbert and Jon Stewart Slam “Corporate Deserters” Who Flee U.S. Taxes

The late night duo are the newest celebrities to speak out against corporate inversions.

Last night the Comedy Central dream team of Jon Stewart and Stephen Colbert each took a moment on their respective shows to attack the growing number of American corporations moving their official addresses abroad to escape U.S. taxes.

The specific kind of tax flight the duo is talking about is known as an inversion, and these maneuvers become all the rage in recent months. As MONEY’s Pat Regnier explains, an inversion is when a U.S. company merges with a (typically smaller) foreign company in tax-friendly country. The U.S. company then claims it is now based in the foreign company’s nation and thus avoids paying U.S. taxes while continuing to enjoy many benefits of essentially remaining an American company.

“It’s like me adopting an African child, and then claiming myself as his dependent,” quipped Colbert.

This practice has been widely condemned as unpatriotic and unfair to American taxpayers who will be stuck footing the bill if the government needs to replace corporate tax dollars with new sources of revenue. The anti-inversion chorus has so far included public figures ranging from President Obama to entrepreneur and Dallas Mavericks owner Mark Cuban, who recently advised his Twitter followers to divest from inversion-happy corporations.

On Wednesday, Stewart and Colbert added their own two cents, with Colbert bringing on Fortune’s Allan Sloan, author of a recent seminal article on inversions, to talk about the problem.

The Colbert Report
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MONEY College

Yes, College Costs a Lot — But Here’s Why It’s Probably Less Than You Think

Perceptions don't jibe with reality for one simple reason: Most families don't actually pay full price for college.

For most families with college-bound kids, the sharp rise in tuition over the past two decades has been downright scary. The price of higher education has more than doubled in the last 20 years—and that’s after factoring in inflation. The full tab for tuition, room, board, and fees at the typical private four-year university was just shy of $41,000 for the past academic year; at public schools, the bill ran over $18,000. That’s a lot of money.

But, as the New York Times points out, this increase doesn’t jibe with reality for one simple reason: Most families don’t actually pay full price for college.

The number that matters most is not a college’s sticker price (the total cost of tuition, fees, room, board, books, and other expenses) but rather the school’s net price—what a student pays to attend after factoring in scholarships and grants. The federal government publishes an average one-year net price for first-time full-time students on its College Navigator site for every college.

Net price is also one of the affordability metrics MONEY used in creating our own college rankings. But with a twist: Our calculation looks at the total price of getting a degree, from freshman year through graduation, instead of a single year. So in addition to factoring in the aid a typical student will get from each school, we also considered tuition inflation and the time the typical student takes to graduate, since many need more than four years to earn their BA.

Using net price instead of sticker price—whether it’s the government’s calculation, MONEY’s, or a personalized result from a net price calculator—makes sense of otherwise nonsensical data. If college tuition and fees really rose more than 100% over the last two decades, no one but Warren Buffett’s offspring could afford to attend even a mid-priced school.

But when you look at the net price instead of the sticker price, the cost of college has risen only about 40% to 50% over the past 20 years based on data from the College Board—half of what the sticker would lead you to believe. The cost is still high, of course, but not nearly as bad as the unadjusted numbers suggest.

The following comparison is good way of visualizing how important this distinction is.

Case Study: Columbia University

MONEY Ranking: 22

Average Time to Degree: 4.1 Years

Sticker Price of Degree: $284,029

Net Price of Degree: $206,752 (72.8% of Sticker)

Sticker-Net Difference: $77,277

Case Study: Harvey Mudd

MONEY Ranking: 7

Average Time to Degree: 4.1 Years

Sticker Price of Degree: $295,024

Net Price of Degree: $187,694 (63.6% of Sticker)

Sticker-Net Difference: $107,330

If you looked at sticker prices alone, you’d think Columbia was the cheaper school. Over the time it takes to get a Columbia degree, a student would spend $284,029 (taking into account future inflation), and $295,024 studying at Harvey Mudd, assuming he or she paid sticker price. But when you look at net price, the picture completely changes.

Based on the average amount of aid students from each school receive, a person who enrolled in Columbia would actually spend about $19,000 more on average over four years than someone who went to Mudd. You could buy a new car with that kind of money. And often, the differences between similar schools can be even more dramatic. For instance, the difference between the net price of a degree at Columbia, the most expensive Ivy in the MONEY ranking, and Princeton, the cheapest, is about $60,000.

So who actually pays sticker price? At private colleges, families who earn less than about $200,000 may get some need-based aid. For lower-cost public colleges, the income cutoff is typically closer to $100,000 to $125,000. And most schools will award merit grants to students with extraordinary talents or academic achievements, no matter how much their parents earn.

However, it’s important to remember the outliers. Elite universities, for example, are a totally different ball game. In general, 40% to 60% of students at top-level schools pay sticker price for their education. For example, only about half of Yale students receive grants from the school to defray the sticker price.

Conversely, there are less selective schools where almost nobody pays full price. At Ripon College, which MONEY ranked 554th, 95% of students receive scholarships from the school. Looking back to our case study, 51% of Columbia students are paying full price, compared to 29% at Harvey Mudd. Yet at No. 7, Harvey Mudd ranks higher than No. 22 Columbia, partly because it has a lower net price, but also because its graduates reported considerably higher average earnings early in their careers.

Of course, some of a college’s total cost also depends on the student. If a Columbia enrollee buys used books, cooks his own food, and makes sure to finish in four years, his final bill will be lower than it could have been. If he goes out every night and takes six years to graduate… well, under those circumstances, any school would eventually get pretty pricey.

MONEY Housing Market

The 5 Cities That Have Recovered Most—and Least—From the Recession

Some areas have rebounded nicely since the financial crisis. But many have not.

On Wednesday, the Department of Commerce announced the U.S. economy grew a healthy 4% in the second quarter of 2014. The good news aligns with other positive economic signals, like an increase in hiring, and suggests the nation as a whole might be on the road to recovery.

Unfortunately, this rosy picture hasn’t been shared equally across the United States. Some areas have recovered well, while others have struggled. A new report from personal finance social network WalletHub highlights which municipalities have made the most progress toward normalcy since the downturn, and the areas that still have a way to go. To compile the list, WalletHub analyzed 18 economic metrics for the 180 largest U.S. cities, including the inflow of college-educated workers, the rate of new business growth, unemployment rates, and home price appreciation.

Here are the results.

Most Recovered Cities

Klyde Warren Park, Dallas, Texas.
Home prices in Dallas have shot up since the crisis, bolstering the city’s economy. Trevor Kobrin—Dallas CVB

1. Laredo, Texas

Over the past seven years, this Southern Texas city’s median income has increased 5% while the population has surged 13%. State-wide bankruptcy is down, and new business growth is up.

2. Irving, Texas

Irving, sandwiched between Dallas and Fort Worth, earned high marks for rising median income (up 6% since 2007) and a decreasing ratio of part-time to full-time workers. The area has seen more college-educated workers moving in.

3. Fayetteville, North Carolina

More workers moved from part-time to full-time gigs in this city than any other place. Plus more college-educated workers are coming than going, helping the population spike over 14% since 2007.

4. Denver, Colorado

The Mile High City has seen a 12% jump in median income since the financial crisis. Most impressively, it’s one of the few areas to have seen home prices completely recover (and then some) from the housing crash.

5. Dallas, Texas

Dallas is still dealing with an increased ratio of part-time to full-time workers, but median income is up nearly 4% and home prices have appreciated a shocking 17% since the housing bubble burst.

Least Recovered Cities

Newark, New Jersey
Newark, New Jersey is still struggling to come back from the financial crisis. Flickr

1. San Bernardino, California

This Southern California city ranks as the farthest away from a full recovery. Both income and housing prices have dropped since 2007, with median income down 4%, and home prices down 43%. San Bernardino’s ratio of part-time to full-time jobs has also gone up nearly 14%.

2. Stockton, California

This Northern California inland area isn’t doing so well either. Incomes are down. Home prices have severely depreciated (down more than 43% from seven years ago), and the foreclosure rate is close to 18%.

3. Boise City, Indiana

Residents of Boise City have suffered an 8% drop in their median income since the crisis. Despite there being increasingly more full-time work opportunities, relative to part-time roles, new business growth remains far below its pre-recession level, down roughly 11%.

4. Newark, New Jersey

The median income remains down almost 5% in this urban area, adjacent to New York. Homes have been hit hard too. Housing prices are about 41% lower than they were in 2007.

5. Modesto, California

This town, which neighbors depressed Stockton, also hasn’t been able to break out of its post recession funk, likely because home prices remain down about 35%, and new business growth almost 9%.

MONEY home prices

Case-Shiller Index Shows Home Price Growth Slowing

Home prices increased at their slowest pace since February 2013, according to the latest report on the S&P/Case-Shiller Home Price Index.

The index, which compiles a 10- and 20-city composite of home prices, showed the 10-city composite posted price gains of 9.4% year-over-year, while the 20-city group showed gains of 9.3%. Both results were significantly lower than the 10.9% and 10.8% year-over-year increases the respective composites showed last month, and much less than the 9.9% gains analysts expected from the 20-city index.

All 20 cities posted some month-to-month price gains before seasonal adjustment, but 14 of 20 saw prices decline once seasonal factors were taken into account.

This is the second bit of bad news for home-sellers this month. On Monday, the National Association of Realtors reported that pending home sales dropped 1.1% in June, and were down 7.3% since June of 2013. Lawrence Yun, the NAR’s chief economist, blamed tight credit, low inventory, and flat wages for the decline. However, Yun predicted sales would increase slightly in the second half of the year, partially because price appreciation has slowed.

“Housing has been turning in mixed economic numbers in the last few months,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “Prices and sales of existing homes have shown improvement while construction and sales of new homes continue to lag. At the same time, the broader economy and especially employment are showing larger improvements and substantial gains.”

Of the 20 cities measured by the Case-Shiller index, Charlotte was the only area to see its annual growth rate improve. Las Vegas experienced some slowdown in price appreciation, but remained the city with the fastest price growth (16.9% YOY), followed by San Francisco (15.4% YOY). Washington had the lowest year-over-year growth at 5.8%.

MONEY Airlines

Airline ‘Transparency’ Law One Step Closer to Misleading Passengers

Boy holding paper airplane behind his back
John Lund/Sam Diephuis—Getty Images

A bill that would allow airlines to hide the true cost of flights (fees and all) was just passed by the House

Currently, airlines must include the full price of a flight—including federal taxes and fees—in advertisements. However, a new bill, which was approved by the House of Representatives on Monday, would allow the ads to exclude government fees, allowing for marketing that could fool consumers into thinking their flights will cost significantly less than they’ll actually end up paying.

As MONEY’s Brad Tuttle reported in April, $61 dollars of a typical $300 flight comes from federal taxes–20% of the overall ticket price. Under the new law, airlines could ignore that portion of the fare and advertise the same flight at $239. Could anyone actually buy that flight for $239? Of course not.

Regulations passed in 2012 outlawed this type of misdirection, but the airlines are now one step away from bringing it back.

The bill’s advocates argue that letting airlines advertise their unmodified prices would show consumers how much the government is adding to their travel bill. When the law was first proposed in the spring, supporters said it would “restore transparency to the advertising of U.S. airline ticket prices, and ensure that airfare ads are not forced to hide the costs of government from consumers.”

Knowing about government-added expenses is all well and good, but consumer advocates believe the law will do more to confuse flyers than educate them. The National Consumers League says the bill doesn’t provide transparency, and merely allows the airlines to advertise eye-grabbing but deceptive lower prices in order to win more business. In this way, the “Transparent Airlines Act” actually makes what consumers must pay for flights more opaque. That’s the opposite of transparency.

The Transparent Airlines Act still needs to pass the Senate before it becomes a law, and its opponents aren’t going to give up without a fight.

“Our organization, together with other consumer groups, will work closely with Senate staff to stop the passage of a companion bill,” said Charlie Leocha, Chairman of Travelers United, a consumer protection organization focused on travelers. “Even though the name of the bill contains the word ‘transparency,’ the effect of this legislation would be anything but.”

MONEY buying a home

What a Zillow/Trulia Merger Might Mean For Consumers

House with SOLD sign
Martin Barraud—Getty Images

UPDATED—4:21 P.M.

It’s official. Zillow and Trulia, the two largest sites in the home listings game, are merging. Together they account for about 48% (not including local websites) of listings web traffic.

The deal, worth $3.5 billion in Zillow stock, has already been good for investors. Both companies’ stock is through the roof as Wall Street rewards Zillow for effectively eliminating its major competitor. Zillow’s press release states that both brands will be maintained, but Trulia CEO Pete Flint will begin reporting to Zillow’s chief executive, Spencer Rascoff. For all intents and purposes, Zillow-Trulia is now the only game in town, with a combined traffic that’s more than 3.5 times that of its nearest competitor, Realtor.com, according to comScore.

What does Zillow’s new, even-more-dominant market position mean for the consumer? Probably not a whole lot—at least initially.

The major concern consumers have long held with both Zillow and Trulia is the accuracy of the services’ listing information. The notorious(ly questionable) ‘Zestimate’ aside, the big two have been dinged for having out-of-date listings information. Because neither company has access to the large sample of multiple listing service (MLS) data that members of the National Association of Realtors are privy to, each relies on a hodgepodge of MLS listings, third-party services, and individual brokerages for their listing information.

The results can be hit or miss. It’s not uncommon to find a home on either site that’s already off the market. Realtor.com, run by the National Association of Realtors (NAR), has made its large MLS network—the site has access to virtually all of the country’s listing services—and more accurate listing information the cornerstone of recent marketing efforts.

A Zillow/Trulia merger isn’t likely to make their listing information any more reliable, and Zillow doesn’t mention increased accuracy as one of the “expected benefits” of the deal. Sissy Lappin, a Texas Realtor and founder of ListingDoor.com, thinks the Zillow/Trulia merger is a pure-and-simple market share grab, not a quest for more or better data. “They’re buying out the competition,” Lappin says.

That shouldn’t come as much of a surprise, both because each company has likely already made deals with all of the data providers willing to do business, and because the data only needs to be accurate enough to attract customers, not necessarily to sell them a particular home. Zillow makes most of its money by providing real estate agents with early leads, and even its own CEO has gone so far as to endorse the notion that “a lead on a stale listing is still a good lead.”

At the end of the day, consumers might find themselves the losers in the merger. 24/7 Wall Street points out that less competition for agents’ business could lead Zillow to charge them higher advertising fees, and those agents may pass on the costs to the buyers they represent. That said, how much agents actually pay for ad space on Trulia/Zillow is a hotly debated topic, and it’s still unclear whether agents—who, after all, provide Zillow with listings—or the company itself has the upper hand in the relationship.

Ultimately, the big question is whether the merger will bring long-simmering tensions between brokerage firms and Trulia/Zullow to a boil. Brokers like the advertising and leads online listings sites provide, but they also don’t like that agents can circumvent real estate franchises and go to the customer directly. There’s always the potential that Zillow becomes so large it can muscle out the middle man, and if enough of the industry fears this is coming true, they could pull their listings entirely.

Zillow denies they have any aspirations beyond creating a mutually beneficial partnership. “We’ve never wanted to become a real estate brokerage,” stated one company spokesman. The question is whether brokers believe that partnership is more beneficial than threatening. If they don’t, and decide to pull their listings—the so called “nuclear option”—it would have a huge impact on the market, for both consumers and everyone involved in the real estate business.

CORRECTION: A previous version of this post stated that Trulia and Zillow shared 90% of online listings traffic. According to Zillow, that number is 48%.

MONEY buying a home

Dear Zillow, Please Don’t Kill Trulia’s Best Feature

Trulia's heat maps are a huge competitive advantage. Courtesy of Trulia

Zillow is said to be interested in buying its competitor, Trulia.com. If so, let's hope they don't ruin what makes Trulia so great.

UPDATED—July 28, 4:25 P.M.

In case you haven’t heard, rumors are swirling that real estate giant Zillow.com plans to purchase real estate slightly-less-giant Trulia.com. Both companies’ stock have shot up on the news, and if the deal succeeds in going through, the new company (Trillow? Zulia?) will have almost 50% of the online listings market.

That’s good for shareholders. What about for consumers? When two businesses decide to tie the knot, you never know what aspects of your favorite company will make it through to the other side. And in the case of Trulia, it would be a tragedy if a ZillowTrulia mashup killed its best feature: Trulia’s amazing visualization of local data.

Sure, Zillow has local data too. And it’s not bad. There’s the average and median sales price, stats on specific neighborhoods (demographics, education, home prices over time), and even a nice little map showing the quality of schools in your chosen area. But Trulia takes all this to another level. Here’s a Zillow data visualization on schools:

ZillowExample
Courtesy of Zillow

Trulia has pretty much the same thing. But it also has these.

Heat maps of crime rates:

TruliaExample
Courtesy of Trulia

Commute times:

TruliaCommute
Courtesy of Trulia

Local listing price heat maps:

TriliaPrice
Courtesy of Trulia

There’s even a national home price heat map:

TruliaNational
Courtesy of Trulia

And that’s not even all of the data maps Trulia offers (I just assumed you might be tired of scrolling). The site also has similar visualizations for hazards (like flood zones), demographics, and amenities.

It’s hard to overstate how useful all of this is. When you’re looking for a house in a large area, getting the big picture is absolutely essential in making the right decision. How far am I from work if I live here? How much cheaper are home prices if I move a few blocks that way? Which areas are safe enough to live in, and what kind of stuff is there do in this neighborhood? These are all questions every buyer asks, and Trulia makes it very, very, easy to get the answers. Its amazing maps have long been cited as a competitive advantage.

So Zillow, if you do end up buying Trulia, you’re getting a pretty amazing product. Just please don’t screw it up.

CORRECTION: A previous version of this article stated that together Zillow and Trulia received 90% of online listings web traffic. According to Zillow, that number is actually 48% (not including local sites).

MONEY Odd Spending

The High Cost of Being A Comic-Con Superfan

Night Elf at Comic-Con
Jessica's Night Elf Rogue outfit won an award at the 2012 San-Diego Comic-Con.

Some fans, known as cosplayers, construct elaborate costumes of their favorite comic characters. The results are amazing, but they don't come cheap.

On Thursday, the San Diego Comic-Con kicked off its 2014 edition. The annual four-day event has grown beyond comics into a geek-culture mecca, attracting fans of everything from superheroes and video games to mainstream network programming.

Of the thousands who descend every year on the San Diego convention center (at $45 a pop per session), most are just looking to meet other enthusiasts and see the latest on their favorite characters. But there’s a large number of fans who want to take their experience a little bit further—from liking a character to becoming it. They’re called cosplayers, enthusiasts who make costumes of their favorite fictional avatars. With costs that can run into the thousands of dollars, these costumes are an artistic and financial testament to the wearer’s love of a particular game or show.

Jessica Al-Khalifah is one of these superfans. She and a friend had gotten into the online role-playing game World of Warcraft and in the process grew attached their virtual avatars. Playing the game was fun, she thought, but what if they could actually be their in-game characters, if just for a day or two?

Lucky for Jessica, there was convention coming up nearby. “We decided we should make some outfits and see what it’s all like,” she says. “It turned out we weren’t so bad at it.”

“Not bad” is an understatement. Jessica’s creation, a Warcraft Night Elf outfit, took four months of on-and-off labor to assemble and involved learning a whole new trade in the process. “I just wanted to make it look really cool, so I said, ‘You know, I think I’ll learn how to leather work,’ ” she recalls. “I hurt my hand a million times.”

The finished product featured ornate leather-and-metal armor, as well as two gigantic painted scythes, and cost roughly $600 by the time she was done. The result was good enough to win her an award at the 2012 San-Diego Comic-Con, but it wasn’t even her most elaborate creation. Another costume, based around the Legend of the Seeker television show, included a leather bodysuit and fiberglass weapon that was electrically engineered to glow. The final materials bill for that one: $1,200.

That kind of price is especially common amongst contest winning outfits. Jen King, owner of Space Cadets Collection Collection, a Texas-based collectibles store, also won a an award at the San-Diego Comic-Con with a Galaxy Quest themed group costume. Jen’s Sarris (the giant green alien) attire cost $500 alone, and her whole group spend more than $4,000. This year, she flew back to Comic-Con to chase another title, this time with her husband and son in tow.

sarrisgroup
Jen King’s group costume cost over $4,000, but won Judge’s Choice at the San-Diego Comic-Con.

Luckily for enthusiasts, not all costumes need to break the bank. Lynn Chan and Sarah Bloom have been dressing up as their favorite characters for years, and tend to spend around $200 per outfit. If you’re careful about picking your subject, Lynn says costumes can be made for as low as $30 (sewing machine not included). That said, like any hobby, the costs do add up over time. When asked how much she had spent over her seven years of cosplay, Sarah couldn’t put a figure on it. “Oh god, I don’t even know,” she laughed. “Probably three to four grand?”

Screen Shot 2014-07-25 at 9.30.28 AM
Lynn Chan (left) and Sarah Bloom (right) spend about $200 per costume.

It’s a lot of money, but in the end, each designer says the effort is worth it for the feeling of accomplishment that comes with finishing a great costume. Jessica still remembers how she felt when she won the 2012 contest. Oh my gosh, that was awesome. It was so surreal,” she says. “All my hard work paid off.”

MONEY mortgages

The Best Loan You’ve Never Heard Of—And How You Can Get One

140618_money_gen_14
charles taylor—iStock

Does a home loan with no down payment and decent rates sound too good to be true? It isn't.

No money down, better rates than an FHA loan, and the ability to finance closing costs. It may sound too good to be true, but in fact it’s a U.S. Department of Agriculture guaranteed rural development loan, and now is your best chance to get one.

Before we get into the details, a bit of background. The USDA provides extremely attractive loans to people in certain rural locations, as an enticement to settle down and develop new areas of the country. The Department of Agriculture uses population data from the US Census and other factors to determine which areas of the country count as “rural,” and then allows buyers in these areas (who meet a few other requirements) to get a USDA-backed loan from an approved lender.

If you’re a candidate for one of these loans, there’s no time like the present to apply. Here’s what you need to know.

What Makes USDA Loans Special?

Ag Department-backed financing is so attractive because it requires no money down but still has rates competitive with other government mortgage products. FHA loans, the most common type of government loan, require a 3.5% down payment at minimum, and saddle low-credit buyers with costly mortgage insurance premiums. USDA mortgages only require a small annual fee (a fraction of the FHA’s rates) and an upfront premium of 2% of the loan amount. However, that premium can be rolled into the mortgage, giving buyers the option of getting financed with a 0% down payment.

What’s The Catch?

The catch is the Department of Agriculture limits who can get one of these loans. If you make more than 115% of your area’s median income or already have “adequate housing,” you’re not eligible for USDA financing. You’re also required to purchase housing that is “modest in size, design, and cost” and meets various building codes.

Then there’s the matter of credit. Technically, the USDA doesn’t have a strict credit minimum, but most lenders are reluctant to sign off on anyone with a score south of 620. That’s more than 100 points higher than credit limits for FHA loans, which require a minimum FICO score of 500 for buyers willing to put down 10% up front. The good news is buyers can offset poor credit by showing mitigating factors like a healthy bank balance or a monthly rent bill higher than the home’s future mortgage payments. You can read the details of buyer and property requirements on the USDA’s website.

Most important, you must live in a specific area defined by the USDA as rural. The department provides a map showing which regions are eligible here.

Why Is Now The Best Time To Get One?

Remember how the USDA decides which areas are eligible for these loans based on census data? Well, the Department of Agriculture hasn’t actually updated its map since 2000, and a lot has happened in the last 14 years. Many areas that were previously considered rural, and therefore eligible for USDA financing, have become regular suburbs. According to a 2011 study by Housing Assistance Council, 97% of the country’s land mass, an area that includes 109 million people, is eligible for a USDA loan. That means about one in three people lived in regions that were USDA eligible when the report was published.

Unfortunately, the ride is almost over. The USDA plans to update the eligibility map with 2010 census figures this October. The Housing Assistance Council estimated that the new information will make 7.8 million people ineligible for USDA financing unless they move to areas within the new eligibility zone.

In reality, the change is going to effect significantly fewer people than that, thanks to congressional action that grandfathered in many areas. However, the USDA told Money.com they don’t yet have exact numbers on how many Americans will no longer live in rural areas after the update, so if you’re eligible now and looking for a loan, it’s better to be safe than sorry. At least some at the department anticipate a rush to get financing before the old rules expire. “We’re going to get inundated,” predicts Neal Hayes, Housing Programs Director for the New Jersey USDA state office.

How Do I Get One Before My Area Is Made Ineligible?

The current map expires on September 30th. That means a USDA-approved lender needs to have submitted a complete, fully underwritten application package to the department’s relevant state office by no later than close of business September 30, 2014, or the application will be considered under new, less favorable requirements.

What If I Already Have a USDA Loan? Can I Still Refinance If My Area Loses Eligibility?

Don’t worry. If you’ve already got a USDA mortgage, you’re done worrying about regional eligibility requirements. As long as you still meet other requirements, you should be able to refinance.

MONEY Estate Planning

What Parents Can Learn From Philip Seymour Hoffman’s Will

Philip Seymour Hoffman
Victoria Will—Invision/AP

When it comes to deciding who inherits what, the law gives the dead wide latitude to impose a number of conditions.

On Tuesday, the will of Oscar-winning actor Phillip Seymour Hoffman was released to the public. In addition to dictating who would receive various parts of his estate, the document also contained a more esoteric request: that his son, Cooper, be raised in one of three cities—New York, Chicago, or San Francisco—to ensure that he would grow up in a rich cultural environment.

It’s an understandable request (and as a New Yorker, I’m flattered we made the list), but is it really legal to dictate where your children grow up after you’ve already passed on? And, more broadly, to what extent can one control their descendants’ actions post-mortem?

By law, Hoffman could not have ordered his child’s guardian to keep Cooper in a particular place. Gerry W. Beyer, a professor at Texas Tech University School of Law, explains that wills can do no more than transfer property from the deceased to their survivors. That said, there are plenty of ways the dead can use property to encourage (or, some might say, coerce) descendants into living a certain kind of life.

If you want to influence your survivors to do something—finish college, go to mass, take good care of Fido, etc.—the best way to do it is to promise them money on the condition they fulfill your request. For example, if you want to make sure your son takes his education seriously, you can leave him $10,000 on the condition he is admitted to a top-ranked college. If Junior knows too many late homework assignments could mean missing out on a huge payday, he’s probably going to hit the books.

Because the deceased have no obligation to give away anything after death, courts tend to give them wide latitude in how their wealth is distributed. The only clear restriction is that inheritance cannot be conditioned on an illegal act (kill the neighbor and you’ll get my car). Otherwise, the condition must simply avoid acting against “public policy”—it can’t encourage something the state doesn’t like—and defining what that includes is almost entirely up to an individual judge.

Ample room for interpretation can sometimes lead to controversial results. In a landmark 2009 ruling, a judge upheld the will of a Chicago dentist that denied funds to any of his grandchildren who married a non-Jew. Various family members sued, arguing the clause provided monetary incentive towards racism. “It is at war with society’s interest in eliminating bigotry and prejudice, and conflicts with modern moral standards of religious tolerance,” one (disinherited) granddaughter wrote in a brief to the Illinois Supreme Court. The verdict? Too bad. The judge found no reason why her grandfather could not choose to favor those descendants who followed his religious traditions.

According to Beyer, this type of decision isn’t uncommon. “This is something the court is doing in its equitable powers,” says the professor. “You can even find similar cases in the same state that go different ways.”

Highlighting this issue, the Supreme Court of Pennsylvania had previously ruled against a different will that also attempted to mandate religious observance. In that case, the document required a son to “remain faithful” to his father’s religion in order to receive any money. Unlike the Illinois case, this court found that the will contradicted the state’s Bill of Rights, which declared no human authority could interfere with acts of conscience. Does that sound inconsistent? Now you’re getting the hang of it.

Luckily, there are some relatively standard limits to what strings one can attach to their will. Beyer advises that courts will often use public policy arguments to deny provisions that are “manifestly unfair or unreasonable.” For example, a provision that would grant a person money for divorcing their spouse would be ruled invalid.

However, when it comes to the more contentious issues, there’s no telling how a case will turn out. Hoffman graciously chose to merely suggest that Cooper be raised in a cultural center, leaving the final decision completely up to Mimi O’Donnell, the mother of his children and inheritor of his estate. However, had Hoffman chosen to stake O’Donnell’s inheritance on keeping his son in a major city, Beyer says, the outcome would rest on the relevant court’s prerogative.

“Where you draw the line can be kind of fuzzy,” Beyer says. “People have done a lot of strange things.”

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