Thoughts About A-B Trusts?

Hello Mumbo Jumbo ites! Happy Cinco de Mayo.

I was recently in a conversation over chips and salsa with a financial advisor who asked me about A-B trusts in light of the new interim federal estate tax laws which establish the exemptions for estate and gift taxes at 5 million dollars.

As I shared with him, this is a very tricky question because we don't know what will happen next year as the Federal government has declined to inform the public as to what direction they will go? I attribute this lack of information to the ideological battle that is currently waging in Washington.

In any event, it appears that the A-B trust may become useful for those with moderate to large estates in the near future but we cannot be sure for now. In any event, an A-B trust can be implemented effectively within a joint trust so for those of you with 1-5 million dollar estates who have separate A-B trusts, you might consider speaking with your estate planning attorney about updating your plan.

Until next time.

SJG
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Get juiced about your estate planning, yeah!!!

Hello my MumboJumboites:

Hungry for knowledge today?  My guess would be yes!  I hope your day is going excellently and I thank you for signing in!

Did you know that people generally spend more time planning their annual vacation than planning their estate?  Thought provoking huh?  So my commentary today is going to drift a bit into the editorial side.

As a society, I believe we are drifting away from one that emphasizes disipline and character and toward one that emphasizes momentary enjoyment, star power, and/or immediate gratification. Heavy stuff I know but worth considering?  When talking to people about estate planning, I often begin to feel the energy draining out of the room and it is always frustrating because this should be a topic of tremendous interest and engagement.  Consider the fact that the average person spends thousands upon thousands of hours during his/her lifetime productively working in order to provide for those that he/she loves the most.  Further, consider the fact that a random life event could virtually wipe out that lifetime of hard effort and leave those loved ones in a serious predicament.  I've seen firsthand the results of good planning as well as poor planning and there is a tangible different in the stress level experienced by loved ones.

So to re-frame the issue, when approached with the topic of estate planning, one should rightfully engage the discussion with gusto, as the wealthy often do, because it involves protecting everything that one has worked so long and hard to achieve.  The most engaging of these topics involve trusts and estates, wills, powers of attorney, business succession planning, living wills a/k/a medical directives and designations of healthcare surrogate, irrevocable trusts, family limited liability companies, corporations, limited liability companies, avoiding probate . . . etc, etc.  Juiced up yet? 

So the message is:  before you plan your next vaca . . . get charged up about  your estate planning!

Thanks for taking in some mumbo jumbo today.

The Big 3 Estate Planning Docs and a Probate Tip !

Hello Legal Mumb Jumbo Ites!

Yes, admittedly some time has passed since my last post.  To offer a shameless excuse, the hectic pace of operating a new law office been a bit of an adjustment; but take heart as I am working to build greater discipline in this area, even as we are building more discipline in all of our systems here in order to ever improve our standard of client services.  My goal is to offer a monthly post at this to occur at the middle of the month, so the next one will be on or about October 15th - I am putting it on my calendar as a recurring meeting!

OK, so the big three estate planning documents are:

1.  Will     2.  Power of Attorney    3.  Living Will (also called Healthcare Directive) & Designation of Healthcare Surrogate

So I tell clients this all the time when they ask me about just doing a will.  Any attorney that would do the will without the other documents without informing you of the need of all three is more than likely not experienced in estate planning and is thus not serving your interests.  These 3 documents have very distinct functions which work together to begin to form a coherent estate plan.  The will is an instruction sheet for the probate court, plain and simple, in that it tells the court what you (the testator) want to happen to your estate.    Note, the will does not prevent probate - only a trust can do this - another topic.  The power of attorney gives your appointee the power to manage your business affairs while you are alive and it expires upon death.  Finally, the living will contains end of life instructions and should appoint someone (healthcare surrogate) to enforce those instructions.  I know, not the most exciting or enjoyable topic but an important one for families nonetheless.  I always say that the peace of mind you gain from setting up your plan may  just help you live longer?

Oh, I promised a probate tip! - make sure all of your retirement accounts (annuities, IRA's, 401K's) and life insurance policies either have an individual or (if applicable) your trust designated as beneficiary of your estate.  We've been doing some probates for clients where the estate was the named beneficiary.

Anyway friends, thanks for checking out some Legal Mumbo Jumbo and as always, I hope this was helpful.


Until next time.

Steven Gibbs, Esq.

Summer Blues and the Law?

Hello Mumbjumbo-ites.  This edition of the blog should be about my requesting tips for maintaining a consistent blog.  Anyway, there is plenty of fodder to discuss.  Today, let's get off the somewhat depressing subject of foreclosures and talk about the lighter topic of basic estate planning - OK, so my material is limited . . .

It probably won't surprise many of you that most people spend more time planning their vacation than their estate.  It also may not be a surprise to learn that most people do not have basic wills, powers of attorney or living wills set up. 

Let me just share that the absence of these documents can result in a fair amount of stress for the family members.  We experienced this kind of stress my own extended family when my uncle was involved in a motorcycle accident last year and the family was left to interpret his living will in order to decide whether to remove life support.  In that circumstance, a document that is unfamiliar to most people, as had been the case for my family members, suddenly became of utmost importance.  In fact, we poured over the words of that document in order to devine every word and the meanings behind them and each section.  Even with the presence of a living will, we still suffered moments of tension when my cousin had to make the tough calls required in that situation. 

It does not take long to put meaningful measures in place to protect family members from significant financial and emotional strain. 

In the weeks to come, I will be talking more about basic estate planning and business succession planning and will be promoting our new product http://www.willbdone.com/ (not yet unveiled) but designed to help the average person complete their estate planning in an easy and affordable process. 

Stay tuned friends and thanks for clicking.

Legal Mumbo Jumbo - 1099's???

Hello Legal Mumbo Jumbo-ites!
As promised, the topic for this week is the ever popular 1099 and it's implications concerning short sales and deeds in lieu of foreclosure.

A few interesting points:
Generally speaking, where there is debt forgiveness, the forgiving debtor is required to issue a 1099. That reality leads to the potential result that when your short sale is accomplished, you just traded a creditor (your lender) for a supercreditor (the IRS). Pause and reflect on this . . .
There are situations where the 1099 is not a detriment but rather a benefit.  For example, if you're insolvent or have lost a great deal of equity, a 1099(c) may not bear significant tax ramifications and having received it signifies forgiveness of the debt and the liklihood that there will be no further action by the debtor (i.e. deficiency judgement action).

If the 1099 concerns debt forgiveness on a primary residence, the debt is exempt under current federal legislation.

The key is awareness and discussing the ramifications of any short sale or other debt settlement with a competant tax advisor.


Until next time loyal friends.  SJG

Hello legal mumbo jumbo-ites. I am pleased to inform you that I have emerged from the post Holiday-New Years black hole of administrative quicksand and now stand ready to continue to provide you with the most practical and engaging legal blog available, given the challenging times in which we find ourselves.

That said, our foreclosure series continues and this week I would like to address the looming topic of deficiency judgments.

A close business colleague recently forwarded me a Yahoo article post dated February 3rd, 2010, in which the author addressed the topic of banks pursuing debtors after the short sale or foreclosure has been completed and the debtor had mistakenly assumed that everything was "hunky dory". This unfortunate event is called a deficiency action or when awarded by the Court, a "deficiency judgment".

Whether you are possessed with the courage and motivation to pursue a short sale of your property or have resigned yourself to an impending foreclosure, you need to know about deficiency judgments.

Simply put, a defiency judgment is the difference between what your property ultimately sells for (generally in a short sale or foreclosure sale) and the unsatisfied portion of the loan, although I have also heard it told that it can be based upon the difference between the current market value and the amount collected in the sale.  Either way, we're talking about a stack of cash that most people just do not have handy at the moment. 

On the positive and comforting side, deficiency judgments have not historically been pursued by most lenders unless there is a strong reason (i.e. deep pockets) to do so.  Less comforting is the fact that in order to mitigate their losses, lenders may, when the dust begins to settle, attempt to pursue these types of judgments more vigorously.  Only time will tell. 

All of the above is not to say that a short sale or deed in lieu is not a viable option.  In fact, there are many advantageous to being proactive and working with your lender to pursue a solution.  All of these issues are case specific and, so goes the shameless plug for this week, an experienced attorney may be able to assist you in negotiating a settlement or waiver of the deficiency, depending upon the facts or the case and perhaps the fair or foul mood of the lender on a given day.

In many cases a bank may ultimately give the debtor a 1099 as opposed to pursuing a deficiency judgment as this option allows them to write off the loss.  I will address 1099's and the issues relating thereto in next week's post. 

As always, I hope this was helpful.  Have a great week.

 

SJG

Happy Thanksgiving !

Friends and Clients,

This week, it is only appropriate to suspend our foreclosure discussion and focus on that which can lift our spirits and challenge our perspective during this wonderful Holiday of Thanksgiving. 

This year, my wife picked up a childrens' book called the History of Thanksgiving.  I recently read it to my kids and it served as a great reminder for me.  I would cite the book but it has since been lost by the little ones (yes I'm blaming them) somewhere in our house - I am sure many of you parents out there can empathize.  Anyway, read through the following summary and don't miss the commentary at the end.

Thanksgiving originated with the Pilgrims, who were Quakers, after they had fled Merry Old England because they could no longer bear the persecution being brought upon them by the King of England.  Incidently the King of England had established a state religion which was not of the Quaker persuasion. 

The Pilgrims left on September 6, 1620 aboard the Mayflower and the journey took 65 days, during which time the Pilgrims ate cold food the entire time and endured numerous other terrible conditions.  One Pilgrim died during the journey due to the conditions aboard the ship.

The Mayflower finally landed at Plymouth, Massachusates, which had been named by British sea Captain John Smith in 1614.  The landing site offered a large brook for fishing and an ideal natural harbor.  The Pilgrims biggest concern was an attack by the local Native American Indians. 

The Pilgrims were ill prepared for the first winter and OVER HALFof the Pilgrims did not survive.  In the spring an Indian by the name of Samoset sauntered into the Pilgrim camp.  The Pilgrims were frightened until he welcomed them in English.  He later brought another Indian named Squanto who spoke even better English and the Pilgrims and Indians began a friendship that lasted about 50 years.   The Indians taught the Pilgrims to survive and thrive in their new environment. At the end of that first summer, food was abundant (sound familiar?).  The Pilgrims and Indians joined in a huge celebration of thanksgiving that was declared "officially" thanksgiving at that time by the Pilgrim Governor William Bradford.  An annual Thanksgiving celebration has endured to this day and in 1863 Thanksgiving was appointed as a national day (Holiday) by none other than Abraham Lincoln.

When I read an account like this (and actually let it sink in) I wrestle with a number of emotions.  I am awestruck at the Pilgrims resolve to launch out into a dangerous, unknown, because they were so driven by the conviction of their faith and the need to be FREE.  I am also convicted at the daily complaints that seem to surface for me over mundane issues like whether my Blackberry is syncing properly.  But most importantly, I think about the Pilgrims' statement in light of our culture today. 

Things appear to be gravitating away from freedom and toward oppression.  With that in mind, I pose the question to you dear friends and clients and I ask myself the same questions.  Are we even willing to inconvience ourselves to protect our precious freedoms, much less risk it all?  After generations of sacrifice by those who in fact give all for freedom, from the Pilgrims to our young men spanning the generations who spilled their blood on battlefields all across this world.  What are we willing to give up in order to preserve the freedoms that we have left, because tyranny and oppression is always lurking to gain a foothold. 

As we give thanks this great Holiday, let us consider and give thanks for all the sacrifices endured by those who came before us so that we could have a seat at this table, and let us ask ourselves what is our role in preserving our freedoms for the generations to come.  

Until next time.

Session 5 - Foreclosure Tips Series

Hello Friends and Clients, Greetings on a beautiful Wednesday morning!

Last week we talked about having a plan and the plan must include whether you hope to save your home.  So this weeks topic concerns the most important decision in your planning which is to decide whether you can afford to fight for and keep your property.  In making this determination you should consider a number of questions which are:  1.  Is there any equity in the property?  Equity refers to the market value of your property less the balance owed on all of the liens against it, and, the costs of sale.  2.  Does the property have economic value apart from the equity?  In other words, are there junior lienholders that could seek legal recourse in the event of a foreclosure in which event there would be economic value in stop the foreclosure and selling the property in order to pay off the junior lienholders.  3.  Are you emotionally attached to the property?  Does a strong emotional attachment to the property make losing is unbearable - if so you may have a greater reason to fight for the property.  4.  Are there other factors that may affect your decision such as tax liability if you sell or lose your property in foreclosure?  You may need to seek professional advice concerning any of the above questions but the important thing is to consider and decide early in your planning process.  

I will leave you with this important question - until next time.

Session 3 - Foreclosure Series

Welcome to another week of this blog series designed to help individuals and families understand and plan for the foreclosure process.  This week's topic - Have a Plan!

We all know that having a plan makes sense but many in the throws of a potential foreclosure tend to lose all sense of control - this is the deer in the headlights scenario that I mentioned in a previous session.  The legal reality is that you are not subject to the whim of your lender and you can take control of this process in order navigate out of it in the most successful way possible.  So here are some initial suggestions:

1.  Communicate with your lender.  First, find out who your lender is - this can be a real challenge.  Look for clues in the documents provided to you.  Legal papers will include the lender's attorney.  Papers from the lender can serve as clues but may only be coming from the loan servicer.  Ask who your lender is - you can respond to any phone calls with a letter indicating to whom you've spoken.  You will fare better by opening the lines of communication rather than adopting a code of silence.  I do qualify this advice by saying that it is not generally beneficial to admit liability for any debt so you should focus your communication to your objective which is most likely to obtain a loan workout, short sale approval or a deed in lieu (three topics to be discussed in future sessions) and refrain from elaborating too much about the hardships in your life (it may be advisable to consult with your attorney concerning any responses to your lender).  Start and maintain a log of contacts.  Find out who is responsible for your loan and who has the authority to negotiate.  Find out who the lender's CEO is, as well as the branch manager of the branch (if applicable), the loan officer who helped you (if they are still around), and record any other person you know in the lender's office. 

2.  Gather your documents.  Find and categorize all of the documents that relate to your property and your loan.  Typically, such documents would include:  copies of your promissory note/s, copies of mortgage/s, copies of documents or letters in escrow, property profile, copies of all letters sent by or received you and/or sent or received by lender, and copies of all foreclosure documents. 

3.  Learn the clock.  Research (or ask your attorney) what the timelines are for the foreclosure process.  In Florida the process will take a estimated minimum of 20 - 30 days from your receipt of service of the foreclosure papers from the lender's attorney (this is in the event you do not respond to the documents).

4.  Decide whether to attempt to keep your home.  This is a topic unto itself and will be discussed in future sessions.

I hope this is helpful.  Until next time . . .

Foreclosure Tips - Second Session

Last week I touched on the basics of the foreclosure process.  This week I want to try to impart some perspective and common sense. 

DON'T PANIC! 

Often times people that are served with foreclosure papers are like a "deer in the headlights".  If you misunderstand the process, you may feel that your property has already been foreclosed upon even though you were just served with legal documents.  Understand that foreclosure is a lengthy process and not a single event.  The process generally takes a minimum of three months and can take a year or more.  So, do not think all is lost and give up without a fight.  You need to be proactive and be willing to learn about the foreclosure procedures and become committed to dealing with your lender - this approach will empower you and will heighten the chance for a more positive outcome for you and your family. Whether you've hired an attorney to help you or not, you need to get comfortable with the idea of communicating with your lender.  You DO NOT have to sound like a lawyer - most of the people you will be dealing with are not lawyers but are simply employees hired to deal with the present crises at hand.    There are a number of strategies available that I will discuss in the upcoming sessions.  For now, just remember not to panic and begin to think about creating a plan for dealing with the foreclosure process.

Tune in to the next session aimed at helping you develop a plan to deal with the foreclosure process.


Until next time.