PB Law Blog... Trusts and Stuff

Update on the current status of the mortgage debt cancellation tax relief provision that expired at the end of 2013.  As soon as the last one-year extension was passed on New Years’ Day 2013, NAR (National Association of Realtors) began working on another extension of this critical tax provision.  With NAR’s encouragement, champions of this provision introduced bi-partisan bills in both the House and Senate (H.R. 2994/S. 1187), to extend the provision for one or two years. Unfortunately, the current prospect of these bills being enacted in the short term is not particularly high. We are facing four big hurdles. 

1. The Chairmen of both of Congress’s tax committees (Senate Finance and House Ways and Means) have committed to passing comprehensive tax reform legislation before the end of 2014.  As part of reform, they have both indicated that they plan to go through the long list of expiring items, including mortgage debt cancellation, and cull those that are not worthy of permanence and make all the “worthy” ones a permanent part of the tax law.  However, tax reform is unlikely to be completed in the coming months. If Congress were to extend the expiring provisions now, it might appear that they were giving up on tax reform.  This is not a signal they wish to send.

2. There are over 50 such expiring tax provisions (often referred to as “extenders”).  Congress rarely passes single tax provisions by themselves. The rules in both the House (and especially the Senate) could allow for added amendments that would turn a simple bill with wide support into a politically divisive bill.

3. The extension of the tax relief “costs” money to the Treasury.  The Joint Committee on Taxation estimates that a one-year extension of the mortgage debt cancellation relief would cost $3.7 billion.  Some Members of Congress will insist that amount be offset by raising taxes elsewhere or cuts in spending – an ongoing debate in Congress. 

4. The Chairman of the Senate Finance Committee, Senator Max Baucus of Montana, has been nominated by President Obama to serve as the next United States Ambassador to China.  His departure from the Senate will turn the chairmanship over to Senator Ron Wyden of Oregon.  As with any change in committee leadership, there will be an adjustment period.

In sum, NAR tried to have the extension passed by year-end but it was not possible. Because of the factors listed above, NAR has so far decided not to issue Member-wide Call for Action at this time, but has instead focused on working with Congressional leadership and the bill sponsors to find additional support for moving this legislation now that Congress has returned to Washington.  Our lobbyists are in daily meetings with Members of Congress, pressing for an extension and providing the most up to date data on short sales and foreclosures to continue to highlight this as a top priority. 

What can you do?  First, you can contact your Representative and Senators to urge them to act on these bills.  The more Members hear from constituents, the better. 

At this point our best estimate is that Congress will pass some extension of this law, probably late in 2014, and make it retroactive.  There is precedent for Congress doing this, but no guarantee.

Thank you to the National Association of Realtors for this timely update (permalink to the original article: http://www.realtor.org/articles/2014-update-on-mortgage-cancellation-tax-relief).

Tiffany Ballenger

Nevada Senate Bill 321 Assists Homeowners Facing Foreclosure

Read more . . .

Education Event! Tiffany Ballenger presents for the National Business Institute, Monday September 16th, 9am- 4pm at the Gold Coast:

Not for the faint of heart, this fast-paced course is designed to provide a comprehensive procedural orientation to the foreclosure process and alternatives to foreclosure. Expert faculty will identify all of the options available for loan defaults and guide you through their mechanics - from forbearance agreements and loan modifications to short sales and the foreclosure process itself. Along with this engaging seminar, you'll receive a reference manual filled with in-depth, detailed information on each of the options discussed, so you can dig into specific laws as you need them. Get the most bang for your buck - enroll today!

• Learn what loss mitigation solutions are available in residential situations and how to put them in place for your clients.
• Walk through the foreclosure process and sale to avoid legal missteps when you're guiding clients through them.

Read more . . .

Tiffany Ballenger, Esq. will be presenting at the "Leaving a Legacy" workshop sponsored by the City of Las Vegas and the National Coalition of 100 Black Women on Wills, Trusts, and Probate on Saturday, June 8, 2013.  For more information and to sign up, please contact Li'Shey Johnson at NCBW100EDC@gmail.com.  Workshops also include speakers on Credit Repair, Life Insurance, First Time Home-Buyers Programs, How to Write a Business Plan, Labor & Enployment, Social Media, & Marketing Your Business. 

Phillips Ballenger will be donating 100% of proceeds from consultation fees for the remainder of the month to the American Red Cross to aid in relief efforts in Oklahoma.  Our hearts go out to the citizens of Oklahoma and the thousands affected by this tragedy. 

Read more . . .

Readers often ask me about do-it-yourself estate planning. Lawyers want to know how to discourage clients from using books or software and websites that spew out documents for free or for a fraction of what they charge. Meantime, consumers ask, “What’s wrong with that?”

The trouble with do-it-yourself planning is that even if your situation seems simple, there are many oddball things a layman wouldn’t think of that can go wrong, especially with wills and trusts. These mistakes can end up costing you or your heirs a lot more than you saved in legal fees.

Eileen Guerin Swicker, a lawyer with her own practice in Leesburg, VA, recently told me about a really doozy. It involved a client who set up his own living trust.

By way of background, both a will and a living trust can be used to transfer assets, and each has unique uses and features. For example, only a will can name guardians for children who are minors. (For how to choose a guardian, see my post, “Adam Yauch’s Will Reveals His Private Dilemma.”) And unlike a will, a living trust can take effect while you are alive, so it can be used to hold assets for your benefit if you become unable to manage them yourself.

The client who Swicker told me about set up his own trust in 1984, using a 3-page form that he bought at an office supply store. He recorded a deed to transfer his home into the trust, and absentmindedly dated that deed 1983 (in other words, one year before the trust was created).

Flash forward to 2009 when this fellow, who had paid off the mortgage on the house, wanted to borrow against it. He planned to give his adult daughter $300,000 in cash so she, in turn, could pay off the mortgage on her own house. Great strategy (see my posts, “5 Ways To Help Family Pay For Housing,” and “The Best Investment Advice I Ever Received”).

But at this point, his clerical error of 25 years earlier came back to haunt him. Why? Because the title company said he didn’t have a clear chain of title to his home, so the bank wouldn’t give him the loan. The man, who by then was 75, called Swicker’s previous law firm in tears, asking for help.

Fixing the problem was a convoluted process that took two weeks and wound up costing the client $2,000 in legal fees. That’s about twice what he would have had to pay back in 1984 if he had had the firm draw up the trust instead of doing it himself, Swicker says.

After that, Swicker hoped the client would call back and ask lawyers to help bring his estate-planning documents up to date. But by the time Swicker left the firm eight months later, he still hadn’t done that. Says she: “It was one of those classic cases of somebody who dug a hole, and kept digging it deeper.”

-Deborah L. Jacobs, Forbes

http://www.forbes.com/sites/deborahljacobs/2012/08/16/what-could-happen-if-you-write-your-own-living-trust/

Dear Liz: Could you advise us on how to protect our 93-year-old mother's assets if she should become ill or die? She does not have a living will or a trust regarding her two properties.

Answer: "If" she should become ill or die? Your mother has been fortunate to have had a long life, presumably without becoming incapacitated, but her luck can't hold out forever.

Your mother needs several legal documents to protect both herself and her assets. Perhaps the most important are powers of attorney for healthcare and for finances. These documents allow people she designates to make medical decisions and handle her finances for her should she become incapacitated. In addition, she may want to fill out a living will, which would outline the life-prolonging care she would and wouldn't want if she can't make her wishes known. (In some states, living wills are combined with powers of attorney for healthcare, and in others they are separate documents.)

These legal papers aren't important just for the elderly, by the way. You should have these too, since a disabling illness or accident can happen to anyone.

Your mother also should consider a will or a living trust that details how she wants to parcel out her estate to her heirs. Of the two documents, wills tend to be simpler and cheaper to draft, but a living trust means the court process known as probate can be avoided. The probate process is public, and in some states (particularly California) it can be protracted and expensive. A living trust also could make it easier for someone to take over managing her finances in case of incapacity or death.

You can find an attorney experienced in estate planning by contacting your state's bar association. Expertise and competence are important, so you may want to look for a lawyer who is a member of the American College of Trust and Estate Counsel, an invitation-only group that includes many of the best in this field.

If she or you are trying to protect her assets from long-term care or other medical costs, you'll need someone experienced in elder care law to advise you.

-Liz Weston, Los Angeles Times

http://articles.latimes.com/2013/mar/29/business/la-fi-montalk-20130331

Going to a woman’s undergraduate college taught me that it’s okay for women to be smart. When I went to Columbia Law School, I found myself explaining that to a very brainy, beautiful classmate who told me she got more dates if she acted dumb. That was in 1978.

Women have come an enormous distance since then. Currently they serve as CEOs of 14 Fortune 500 companies, according to Catalyst. Among them: Indra K. Nooyi at PepsiCo;  Irene B. Rosenfeld from Kraft Foods; Patricia A. Woertz of Archer Daniels Midland, and Ursula M. Burns of Xerox.

Still, for all we have achieved — with our careers, managing our finances, sharing child rearing and other household responsibilities — we’re not as savvy about estate planning as we ought to be. In fact, a recent survey by EZLaw suggests that women care more about losing weight than about protecting their financial assets.

Does this mean women have more will power when it comes to their waistlines, than when it comes to estate planning?

If so, it’s a shame, because estate planning affects women profoundly. Among Americans 65 and older, 42% of women, but just 14% of men are widowed. Women’s longer life expectancy, combined with their tendency to marry older mates and their lower lifetime earnings means they are far more likely to see their living standards compromised in retirement if proper estate planning isn’t done. And since it is women who most are often widowed, they usually have the last word about which of a couple’s assets ultimately go to family, charity or the taxman.

 

In a field still dominated by men, there’s a lingering tradition of paternalistic tools and techniques – such as locking inheritances up in trusts for widows who presumably can’t even balance a checkbook. Women who don’t speak up about estate planning might wind up capitulating to strategies that put them at financial disadvantage.

Perhaps worst of all is how a lack of planning can affect families of young children. Without a will, if your children are minors and you were a single or surviving parent, a court will appoint a guardian for them.

As I noted in a recent article for Forbes.com, “Estate Planning For Women (And the Men Who Love Them),” now, more than ever, women need to take charge of this process, or at least be equal participants.

But how can you start a conversation about this stressful topic? That’s the question I’ve been asked most frequently since my book Estate Planning Smarts was published. In fact, it has come up so often, that I added a special section on the subject to the second edition of the book, published in April.

Sometimes it is best to have a series of talks, rather than covering everything at once. Depending on whom you are talking with, here are some conversation starters.

With your spouse or partner. Couples have their own special ways of communicating, and you know better than anyone which approach will play best with your mate. You can emphasize your own mortality (“I’d like to talk about ways to provide for you and the family in case something happens to me”) make it a subject of mutual concern (“We’re not getting any younger – I think it’s time we did our wills”) or focus on the children (“Now that we are parents, we really shouldn’t procrastinate any longer about doing our wills.”) More about this from my colleague Hani Sarji in his post, “Estate Planning Smarts For New Moms.”

Sometimes it’s easier to start with current events or an anecdote about other people. Perhaps it’s a movie you saw, a book you read, a news report about someone your age who recently died or a sudden death in your community. If a friend or family member has talked to you about their own plan (say you’re the godmother of a friend’s new baby) it can help take the sting off confronting the awful thought that one of you is likely to go first.

Those who encounter pushback from a spouse or partner have a card to play that’s probably not appropriate for other people who are broaching the topic: “We owe this much to each other” or “Please do this for my sake.”

With adult children.While parents have no obligation to change an estate plan after hearing a child’s preferences, disclosing what they plan can help refine their approach. For example, maybe you are thinking of leaving one child a larger inheritance than the others because he has more children. By sharing these details with this child, you might learn that he would rather receive the same amount as his siblings, rather than face their wrath.

Above all, explaining the principles that have influenced your decision could make them easier for children to accept. For instance, don’t assume it’s obvious that you left the summer home to one child because he used it most; a parent’s death or even illness can rekindle sibling rivalries from decades earlier.

Of course, parents who share their thinking risk hostility from adult children who do not like what they hear. To reduce the possibility of a hostile audience, parents may talk to each child separately, rather than addressing them as a group. Afterward, ask each child, “What do you think?” You may be surprised to find that adult children have great ideas and interesting opinions.

With your parents. A trickier situation involves adult children who notice signs of a parent’s mental decline. Once parents become incompetent, they lack the legal capacity to make binding commitments, so it is important to sign estate-planning documents before that happens. But bringing up the matter may threaten a parent’s independence and desire for control.

One possibility is for the child to say: “I just did my own estate plan. Don’t you think you should update yours?” Another is to convey a story about a friend’s parent who did not take the necessary measures (for example, by not signing a durable power of attorney) and how much hardship was caused for those children.

Sometimes there is a fine line between being well meaning and protecting your own inheritance. For that reason, lawyers typically insist that they have an opportunity to meet with the parent separately, even if a child provides transportation to the office.

Their goal is to guard against the two most common grounds for contesting a will or trust. One is undue influence, which refers to efforts to coerce someone to sign estate-planning documents that favor one heir over others. Another is the argument that the client lacked capacity when signing the document.

Sure, it is easy to get frustrated with parents who do not put their affairs in order. But keep in mind that having the conversation requires them to confront their mortality. For both parents and children, that can be a gigantic step.

Not for women only: Have you had this conversation with anyone in your family? If so, please post a comment below telling us how you did it and what happened.

-Deborah L. Jacobs, Forbes

http://www.forbes.com/sites/deborahljacobs/2011/08/09/nice-girls-talk-about-estate-planning/

Having a child is often the first time people think about their estate plans. New moms have much on their mind. I highly recommend the second edition of Deborah L. Jacobs’ book Estate Planning Smarts: A Practical, User-Friendly Action-Oriented Guide to help them plan for their family’s future.

Caring for yourself. Contrary to what many think, estate planning is not just for millionaires and billionaires. Everyone should have at least a basic plan that provides for what will happen in the event of disability or illness. Failing to have an estate plan can hurt the people you love.

The first chapter of Estate Planning Smarts is titled, “Nothing Lasts Forever.” The subtitle suggests to “[r]ead this chapter even if you are hearty and clear-headed.” This chapter defines and discusses documents that everyone needs in their estate plan – a power of attorney, HIPAA release, living will, and health care proxy.

Once you have these basic estate planning documents, you will need a place to store them. The second edition of Estate Planning Smarts has a new and very informative section on organizing financial records. Jacobs discusses various options that you have, including keeping your records in loose-leaf binder, on a computer, or on an online storage site.

Providing for your children. Jacobs informs that estate planning entails providing for your children’s future and making “sure someone will care for them if you suddenly perish.”

Estate Planning Smarts has an entire chapter devoted to anticipating the needs of young or disabled children. Chapter 5 gives tips about choosing a guardian to take care of your child in the event something happens to you. This chapter also discusses how to leave sufficient funds for your child and how to put money in good hands. The to-do list at the end of the chapter can help you avoid potential legal and economic pitfalls.

Chapter 8 discusses a topic that many think about only after they become parents: life insurance. Jacobs discusses how life insurance can serve your estate planning goals, how to avoid tax traps, and finding the best way to fund the premium.

Chapter 9 is also essential reading for a mother. It discusses how to pay for health care and education. This chapter begins by discussing custodial accounts for minors. It then discusses funding Section 529 plans and Coverdell Education Savings Accounts, and financing heath care and education by using a trust. There are many choices to consider and the to-do list at the end of the chapter asks some questions and tells you the action to take if your answer is “yes.”

Your assets. Estate Planning Smarts has advice on deciding who gets what (chapter 2). It also has chapters devoted to specific assets – retirement accounts (chapter 7) and houses (chapter 11).

Business owners. Today, many mothers are also business owners. Some women are mothers, business owners, and the bread winners in the family. These entrepreneurial mothers will find the advice in chapter 12 invaluable. As the subtitle states, “Read this chapter if you have your own business or share in a family-held enterprise.”

Taxes. Jacobs discusses estate and gift taxes in plain English. Chapter 3 (Understanding the Tax System) is up-to-date and “covers all the ramifications of the 2010 estate tax overhaul.” As the subtitle to the chapter informs, “Read this chapter even if you think estate taxes won’t affect your heirs.” If saving taxes is a high priority for you, then chapter 15 is also invaluable: Give Now, Save Tax Later.

Giving. If you want to give to your family, chapter 13 is key. Many new moms take motherhood as an opportunity to turn the table and celebrate their own moms and families. Chapter 17 discusses philanthropic giving and gives tips on how you can support the causes that you care about.

Why Estate Planning Smarts? You can’t afford to neglect estate planning. Estate Planning Smarts is, therefore, a must-read. It is written with you in mind.

• Chapter previews. Each chapter begins with topics that you will learn about.
• Great writing. Jacobs has the rare talent of discussing complex issues in a way you can understand. Jacobs is an award-winning business journalist and a lawyer. Her writing is clear and concise.
• Informative charts and graphs. Estate Planning Smarts uses charts and graphs that provide perspective and insight.
• Life-changing to-do lists. Each chapter ends with a very useful to-do list. Estate Planning Smarts is not just for reading; it is for taking action.
• Handy glossary. There is a very useful glossary at the end of the book.
• Detailed index. Estate Planning Smarts has a 26-page index that will allow you to find the information you are looking for.

The perfect gift. Tell new moms you know happy Mother’s Day and give them a copy of Estate Planning Smarts as a gift. It is a great way to show them you care, and they will appreciate it. I gave the first edition of Estate Planning Smarts to new mothers that I knew and they were always grateful for the gift. This year, I will give them the second edition of Estate Planning Smarts. Jacobs has revised the book by bringing it up-to-date, and she has added helpful new information. For example, on pages 289-291, Jacobs gives tips on how to start the estate planning conversation with family members. On pages 291-292, she emphasizes her objection to DIY estate planning.

For all mothers. Estate Planning Smarts has useful information for all mothers. For example, grandmothers would especially find interesting chapters 14 (What You Can Do for Grandchildren), 13 (Subsidize Friends or Family) and 9 (Pay for Healthcare and Education). Anyone who has done an estate plan before should read chapter 19 (Keep Your Plan Current).

For all women. Jacobs is on a mission to educate women about estate planning. Tomorrow, May 9, she will give a talk at Barnard, Estate Planning Is A Women’s Issue. Here is the description of the talk:

Estate planning is important for both sexes, but for various reasons, it affects women more profoundly. As a group, women live longer than men, earn less than them, and are more likely to spend their final years without a spouse or partner. Therefore women need to be especially vigilant about providing for their financial security. Whether you’re doing an estate plan for the first time, or revising a plan to reflect changes in your life, this program will cover the key issues, including:

• Caring for yourself
• How the new tax law affects estate planning for couples
• How to start a conversation about estate planning — with your spouse or partner, with adult children, with aging parents
• Should your plan be equal or fair?
• The impact on planning of subsidizing adult children and grandchildren
• What are non-probate assets and key pitfalls that surround them

This talk will address estate planning issues for women, but of course, the men in their lives are also welcome. Jacobs will adapt this talk and speak to other audiences around the country during the year ahead.

-Hani Sarji, Forbes

http://www.forbes.com/sites/hanisarji/2011/05/08/estate-planning-smarts-for-new-moms/

A recent case further bolsters Limited Liability Protection, in this case, under Federal Bankruptcy Law. 

In In re Warner, 480 B.R. 641 (Bankr, N.D. W. Va. Sept 27, 2012,) the trustee in the bankruptcy of an LLC member asked the Bankruptcy Court for a declaration that the LLC was dissolved pursuant to the LLC's own operating agreement, which called for dissolution upon the bankruptcy of a member.  In this case, the Court denied the Trustee's motion, relying on provisions in the Bankruptcy Act that trump other contracts.  This ruling left the trustee with very limited options for liquidating the member's LLC interest and paying out to the bankruptcy creditors. 

 

 

While most of my asset protection planning involves third-party (i.e. non-bankruptcy) creditors, however this case is important in light of the fact that the court upheld asset protection provided by the member's LLC. 

 

-Tiffany Ballenger, Esq.

 

 

SB 405 went into effect on October 1, 2011. It strengthens the asset protections available to Nevada-based entities. The updated charging order language affects Nevada Limited Liability Companies (LLCs), Corporations and Limited Partnerships (LPs). The law changed as follows: the new language in the statute makes the charging order the exclusive remedy of a judgment creditor- including single member LLC’s and single shareholder corporations. A charging order is a remedy issued by the court giving the creditor a lien over the debtor’s interest in the entity.
Read more . . .