4TH BIGGEST MISTAKE IN ESTATE PLANNING (Part 2) – HAZARDS OF JOINTLY OWNED REAL ESTATE

     It is much easier to add a child’s name, or your girlfriend (boyfriend’s) name on the title to real estate, than it is to remove that name on a real estate document.

Consent Required. If you need to remove a joint tenant’s name from title to real estate, you have to get that person to sign a quit claim deed that ends their ownership of that piece of real estate. For example, a joint tenant must sign the quit claim deed in front of a notary conveying the real estate back to the original owner. Children can be one set of problems, but ex-girlfriends and ex-boyfriends may hold grudges and may want money or something else to bargain for the release their interest in real estate.

Gift Tax and Income Tax Issues. Gift Tax Issues: Adding child’s name or a girl/boyfriend’s name on the title to real estate legally is a gift of 1/2 Fair Market Value of the property. If, for example, Mom owns a house worth $50,000 and adds daughter’s name on the deed. That is an immediate gift of $25,000 to the daughter. Since that $25,000 is greater than the $14,000 annual gift exclusion for the current year, a Gift Tax Return should be filed for the $11,000 that exceeds this annual gift tax exclusion amount. There is a legal obligation to file a US Gift Tax Return, but that discussion is beyond the scope of this short blog.

Donor’s Tax Basis: Making a gift of real or personal property, the law says that the donee – receiver of the gift – receives the same tax basis as the donor – the person who gives the gift. That means that – using the same example – Mom bought a house in 1970 for $50,000. In 2010, Mom adds the daughter’s name on the deed. Mom dies and daughter sells the house in 2020 for $125,000. The daughter will have to pay capital gains tax for amounts over the 1970 value of the home of $50,000 – Mom’s tax basis. So, the daughter owes tax on the capital gains of $75,000 ($125,000 – $50,000 = 75,000). Daughter did not plan for that – normally. Bad result.

Solution. A better result is to either go through the Probate process with a Will, or to title the home into the homeowner’s revocable living trust. In both cases capital gains taxes are completed and legally avoided, because the beneficiaries legally get a “step up” in tax basis as of the date of death of the other joint owner – so that no taxes are due at all when the property is sold at present date fair market value.

 

            Call (248) 643-9530 or email info@zeiglerlaw.com for a consultation.

For more information visit our website http://www.zeiglerlaw.com/how-to-avoid-probate.html

4TH BIGGEST MISTAKE IN ESTATE PLANNING (Part 1): Hazards of Joint Ownership of Bank Accounts.

 

  1. Each joint owner owns 100% of the entire account.

               One of the biggest hazards of joint ownership is the right of each owner to withdraw all of the money from the joint account. Joint ownership means each joint tenant possesses 100% ownership of the account. So you can open a bank account and deposit all of your own money into it, but as soon as you add another person’s name to the account the money becomes just as much theirs as it is yours. Unfortunately, withdrawal from jointly owned accounts is not dependent upon who the money truly belongs to – each joint tenant has the ability to withdraw what they please. Consequently, 100% of the assets of the joint account are liable for debts of the joint tenants. For example, suppose Mom has a bank account that has $5,000.00 in it. Suppose her son has a judgment against him for car repairs totaling $4,500.00. Mom adds son’s name to her account. Now, son’s creditor can withdraw $4,500.00 satisfy the debt – regardless of the fact that Mom is not the one in debt. Of course, these issues are difficult to sort out and can lead to litigation between joint tenants, which can be very costly for both parties involved.

               Call (248) 643-9530 or email info@zeiglerlaw.com for a consultation.

For more information visit our website http://www.zeiglerlaw.com/how-to- avoid-probate.html

Historic Real Estate Law Changed: Dower Abolished April 6, 2017

            Michigan Governor Rick Snyder just signed a law abolishing Dower, a provision that has been in effect since 1846. This provision gave a wife a legal right to claim a one-third interest in any real property owned by her husband, upon his death. The 2015 Supreme Court ruling in Obergefell v Hodges, allowing same-sex marriage, sparked controversy regarding a wife’s dower right. Dower right became an issue of inequality between widow’s of same sex marriage and those of opposite-sex marriage. As of April 6, 2017, however, there is no more dower right, ultimately affecting Estate Planning Law as well as Real Estate Law proceedings.

            Under current Michigan Law, a wife is still provided with options upon becoming a widow, depending on if her husband has left a will or not. The reason behind creating these options was to protect a wife from being completely disinherited by her husband and left without any means of support. Previously, the right to dower was one of these options. The other current options are as follows: (1) if the deceased spouse has left a will, the surviving spouse can claim what was left to him/her or take one-half of what would have been left to him/her had the decedent not left a will minus one-half of the value of the decedent’s remaining property. (2) If there is no will, however, the surviving spouse is entitled to the first $150,000.00 (COLA adjusted) of the deceased spouse’s estate plus one-half of the rest of the estate. This abolishment of Dower does not mean that widows will no longer be protected, but simply means that surviving spouses are treated equally.

            Before April 6, 2017, a wife’s signature was necessary on any legal document that transferred real property in her husband’s name to another person, therefore relinquishing her Dower right. However, since the enactment of this law, a wife is not required to sign all these documents. Regardless, there is still one real estate document that will require both a husband and wife’s signature, even if it is owned by only one of them. This document is a mortgage of residential property if said property is occupied as their joint homestead. The other exception to this law is if a wife became a widow before the effective date of this law, she, of course, still has a legal claim to her Dower right.

            The passing of this law may complicate simple Real Estate and Estate Planning Law proceedings. For help with these issues call our office at 248.643.9530 or email info@zeiglerlaw.com and schedule your consultation.

See https://www.legislature.mi.gov/documents/2015-2016/billanalysis/House/htm/2015-HLA-5520-718B58C9.htm

Can the Police Stop you for Any Reason?

The United States Constitution protects citizens against “unreasonable searches and seizures.” A law enforcement officer may effectuate a traffic stop upon “reasonable suspicion” the person stopped is breaking the law.

But how far can the law bend to determine what is “reasonable suspicion”? Pretty far, as it turns out.

Recently, the Michigan Court of Appeals (.pdf) ruled a police officer may perform a traffic stop, if the vehicle is in “such an unsafe condition as to endanger a person.”   The Court did not define what would be considered an “unsafe condition.” Would a cracked windshield or an air freshener hanging from the mirror be an “unsafe condition”? What about tires with a few miles on them, or a gas cap not closed, or a crumpled fender? Short of factory-fresh condition, we could envision a vehicle somehow, possibly existing in a condition that could possibly “endanger a person,” effectively allowing police to perform a stop for any reason whatsoever.

In the early morning hours of January 5, 2014, Officer Daniel Lobbezzo observed a vehicle, driven by Trevor Allen Vanderhart. The Officer initially believed he saw one tail light not operating, but upon closer observation, observed it was operating, although dimmer than the other tail light. Officer Lobbezzo did not indicate Vanderhart was speeding, or weaving, or failing to stop, or driving in any erratic fashion whatsoever. Indeed, the only reason Officer Lobbezzo proffered for making the traffic stop was this dim tail light.

Michigan Law requires a vehicle to have tail lights that (1) operate when the headlights or auxiliary lights are one (2) is red and (3) visible from a distance of 500 feet. The Court of Appeals ruled Vanderhart’s vehicle (according to the evidence) complied with the law regarding tail lights. However, the Court made the determination the different brightness of the tail lights constituted an “unsafe condition as to endanger a person” and therefore the traffic stop was reasonable. (The “unsafe condition” being that a person following this vehicle could be lead to believe the person driving was braking the entire time.)

To further demonstrate how fine the line is, this is a split decision. (Michigan Court of Appeals decisions are made by three judges—majority rules.) The lead opinion decided the traffic stop was valid, even though the tail lights were operating correctly because the vehicle was in an “unsafe condition.” Another judge concurred (agreed), but disagreed with the lead opinion’s reasoning, stating the tail lights were not operating correctly, and would not agree a dim tail light is an “unsafe condition.” A third judge dissented (disagreed) with both for the simple reason that the conflicting reasoning between the two other judges makes no sense.

Judge One: “Traffic stop not valid under MCL 257.686, but valid under MCL 257.683.”

Judge Two: “Traffic stop valid under MCL 257.686, but not valid under MCL 257.683.

Judge Three: “How can both those statements be true?”

Simply realize this—if a law enforcement officer intends to pull you over, they now have more excuses to do so.

 

Court Enforces 1-Year Limit on Ex-Employee Suit!

The employment application provided that an employee agreed NOT to bring any claim against the employer more than 1-year after the actual incident or the date of the termination of employment. The Michigan Court of Appeals held that the employee waived the 3-year statute of limitations and a shorter 1-year limitation does not violate public policy.

            Even more salient was the ex-employees claim was brought under the Persons with Disabilities Civil Rights Act (PWDCRA) as “unconscionable”. The Court rejected the claim because the ex-employee signed the employment application acknowledging that he read and understood the terms and conditions of his employment.

            So now we have a clear law in Michigan favoring employers limiting claims by ex-employees to 6-months in employee handbooks and 1-year in employment applications.

            See Sams v. Common Ground,

http://publicdocs.courts.mi.gov/OPINIONS/FINAL/COA/20170131_C329600_41_329600.OPN.PDF

UPDATE: HALTED: NEW OVERTIME RULES EFFECTIVE DECEMBER 1, 2016.

The new overtime rules setting a $913.00/week salary level (up from $455.00/week) to become effective on December 1, 2016 has been stopped in a case brought by 21 states against the US Department of Labor. State of Nevada, et al v. US Department of Labor, et al, Case No. 4:16-cv-00731.

The U.S. District Court in the Eastern District of Texas issued a nationwide preliminary injunction saying the Department of Labor’s rule exceeded the statutory authority of the agency.

It is still too early to determine what, if any, posture the Donald Trump administration will take in the shift away from centralized power in our nation’s capital. The Trump campaign has spoken out against Obama-backed government regulation and generally aligns with the business groups that stridently opposed the overtime rule.

The US Department of Labor said in a statement on 11/22/2016:

“We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans. The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule.”

Stay tuned for the rest of the story.

When Can you Throw Away the Tenant’s Stuff?

What does a Landlord do, if they think the Tenant has moved out, but there are still some items remaining in the property?

Here are two (2) situations very instructive on this common occurrence:

(1) Lawyers in our firm represented a Landlord who believed a tenant had moved out. The only items left in the apartment were 10 large garbage bags; which the Landlord promptly threw out.

The next thing the Landlord knew, they were being sued by the Tenant who claimed he had $10,000 worth of collectible baseball cards in those bags, and he was entitled to damages—actually triple damages!—for the Landlord throwing them away.

The Landlord hired us, and we found ourselves deep in litigation over these alleged baseball cards. Of course, we couldn’t prove it was just garbage (the trash was long since hauled away), and we suspected the tenant was simply making this up.

The law states the Landlord must “believe in good faith” the property was abandoned and entitled to throw the items out. The court was sympathetic to the tenant—we ended up settling the matter by paying the Tenant.

(2) A Tenant retained us because his landlord had obtained Judgment of Possession, entered the house, and threw away or removed numerous electronics, furniture and other items. The Tenant provided us with pictures of the property—there were still pictures on the walls, cleaning products in the cupboards and food in the refrigerator.

We placed the Landlord on notice these pictures would demonstrate it did not act “in good faith” by claiming the property was abandoned. The Landlord paid a large sum for his actions.

The lesson is simple—if the Landlord intends to throw out the Tenant’s items, it had better do it correctly.

Recently, the Michigan Court of Appeals decided Anderson v Chaudy (.pdf) where the Landlord obtained a Judgment of Possession and even obtained an Order of Eviction. In executing the Order of Eviction, the Tenant’s personal property was initially placed on the front lawn, and then subsequently removed and destroyed.

The court held the Tenant may have a right to claim damages—even triple damages—for the removed property since the removal was not “necessary to effect the eviction nor incidental to the process of eviction.” The court would allow the matter to proceed through litigation.

It is important to provide the appropriate provisions within the Lease to protect the Landlord. We often see Leases that are form documents the Landlord obtained through a friend, or on-line, and these Leases rarely cover this common occurrence.

We have developed a lease designed to protect Landlords from these (and numerous other) situations. Call (248) 643-9530 or email info@zeiglerlaw.com to schedule a consultation.

Account of Convenience or Joint Account?

             This daughter, Anne, caused an expensive mess when her Dad added Anne’s name to their Dad’s bank account. The original purpose of adding Anne’s name to the account was for her to help Dad pay his bills.

             Creating a joint bank account allows that new joint owner to take the money in the joint account for any purpose.  Here, in this case, Anne was added to an account of her father and then she used the money for purposes of buying things for herself and her daughter.  So, Anne used Dad’s money for her own purposes and not for the purposes with which Dad intended – not for his own use.

            The Court framed the legal inquiry as: “Was Dad’s money used for the purposes of caring for Dad?”  If not, then the Court will impose a constructive trust on the money in the joint bank account and then the wrongfully acting child (Anne) will have to repay the money into the estate of the Dad, so that the rest of the children or heirs can receive what they are entitled to receive, by will or intestasy.

            In this case, Anne did not treat the joint account like an account of convenience, the new joint owner (Anne) took money for the purposes of buying things for her and her daughter, and now will have to repay that money to the estate of her late father. In short, the evidence showed that Dad intended that Anne help him pay his bills, and the money in the bank account was not intended as a gift.

See case [ http://www.michbar.org/e-journal/eJournalDate/08312016]

For more information regarding the risks of joint ownership bank accounts visit our website at http://www.zeiglerlaw.com/how-to-avoid-probate.html

Or call (248) 643-9530 or email info@zeiglerlaw.com to schedule a consultation.

Third Biggest Mistake in Probate Court

When there is ONLY a Will!

These are a few of the difficulties that arise when ONLY a Will is put in place:

Difficulty #1: Instructions to Probate Judge. What is a Will? A Will is nothing more that a letter of instructions to Probate Judge about how your estate will be divided upon your death. In essence, a guarantee of probate.

Difficulty #2: Unequal Distributions are Possible. A Will deals only with property owned in the decedent’s name alone. Jointly held property (JTWROS) passes to the surviving joint owner – and is not distributed according to the Will. So, for example, if a Will says that all property is divided equally between three children, and one child is the joint owner on a $100,000.00 bank account with the decedent, that bank account is not divided equally with the other children. The bank account passes to the surviving joint owner by contract law, not by the Will in Probate Court.

Difficulty #3. Wills require Conservatorships for Minor Children. Bequests to minor children require the creation of Conservatorships and the annual reporting to Probate Judges of all income and expense for each minor child until age 18. Some Probate Courts require approval prior to the expenditure of funds for the minor child, or before the withdrawal of funds from the minor’s Conservatorship Estate. Upon reaching age 18, the balance of the Conservatorship Estate is paid directly to the 18–year-old child without restrictions – to spend as the 18-year-old sees fit. Usually, not a good decision. In Wayne County, a bond is almost always required by the Probate Court.

Difficulty #4: Guardianships may be required for Minor Children. A Will may require the creation of a Guardianship Probate Proceedings where a parent dies while the child is still a minor, especially in single parent situations. If the Will does not appoint a Guardian, the Probate Court has the power to appoint one, or a public administrator as Guardian who is a stranger to the family. A Court appointed Guardian, can be a different person than the Conservator, which just makes caring for a minor child more difficult and expensive since two different people may be making the care and support decisions for a single minor child.

Difficulty #5: Inventory Fees. Probate Courts require the payment of Inventory Fee that is assessed on the total value of the Probate Estate, usually less than 1/2 of 1%. This fee is completely avoidable with the use of a funded revocable trust for the decedent’s personal and real property.

Call (248) 643-9530 or email info@zeiglerlaw.com for a consultation.

For more information visit our website

http://www.zeiglerlaw.com/how-to-avoid-probate.html

#YouAreServed!

The law invariably lags behind technological advances. A new product or service may take off very quickly (the iPhone is not even 10 years old), or it may equally fall off as a fad as fast as it started. (Pokemon Go hardly lasted a weekend.)

And the law moves more slowly, attempting to regulate technology where necessary, or incorporate it into practice. Some Federal Courts have provided for electronic filing since 1996; most Michigan State Courts have yet to implement an electronic filing system.

Many of our laws (and consequently contracts) retain the concept of using the United States Postal Service, rather than e-mail. Even though it is much faster, more convenient and expedient to e-mail opposing counsel certain pleadings, the rules still anticipate mailing the documents.

In the same manner, the law does not quite recognize it is easier to reach someone by E-mail than by letter. In fact, at this point in time, people are communicating through Text, Twitter and Messenger because E-mail is too slow!

Yet our laws continue to require us to provide service by either personally serving someone by the use of a process server, or mailing a certified letter, restricted to the person being served. You could send a Complaint by e-mail, Facebook messenger, and text, and it is not sufficient service, even though the person being served is far more likely to receive the document through those technologies than through a certified letter.

However, the law is slowly catching up. It has always provided a means whereby a litigant may petition the court to serve a person through Alternate Service, such as posting on their door, printing in the local paper, or providing it to another adult in the household. The court focuses on a means “reasonably calculated to give notice.” (Rule 4(f) of the Federal Civil Rules of Procedure.)

Many courts are beginning to recognize the technologies of the last decade are far more “reasonably calculated to give notice” to a person than the use of mail or even personal service. When is the last time you received personal mail? When is the last time you looked at an e-mail, text or message?

Recently, a Federal Magistrate allowed the use of Twitter to serve a Kuwaiti national, recognizing Twitter was more likely to give notice than regular means of service. Meaning you could look at a tweet, or open a message and discover you have been served!

Of course, this will raise new issues the law will have to address. How do you verify a person read a tweet? Or that the e-mail was not filtered out as spam, or blocked? For the time being, we will remain with traditional service—certified mail and process servers—and the more common alternate service of posting and publishing. But in the future, more and more persons will be asking for alternative electronic means, and it would appear courts are more inclined to grant such requests.

The next time you read a tweet—you could be served! #YouAreServed!