JudithPikeLawBlog

Asset Protection and MassHealth Qualification

2012-01-10T08:51:00.000-08:00

My older generation of estate planning clients often ask how to protect assets from being spent down on long term care in the event the client becomes ill and needs to enter a nursing home. Many clients want to protect the assets they have worked so hard to generate over their lifetimes and do not want to end up spending all assets on care for the last chapter of their lives. This question triggers a discussion of “Medicaid Planning”, which is a way to protect assets so as to qualify the client for governmental benefits in the event he or she must enter a nursing home. The governmental benefit in question, formerly known as Medicaid, is now called “MassHealth”.

As the population ages and the government’s burden increases, it has become increasingly more difficult to qualify for MassHealth, and the regulations are being modified regularly to limit eligibility. MassHealth qualification mandates that an applicant have not more than $2,000 in “countable assets”, and limits income as well. Clients who have in excess of $2,000 in assets will often ask about “giving away” their assets (usually by transferring them to their children) in order to qualify. Unfortunately, the days of simply taking everything out of mom’s name are gone.

When applying for benefits, you must disclose all assets including any transferred away within the preceding five years. Certain assets are considered “non-countable”, but MassHealth will “look back” at all asset transfers during the five years prior to the date of application, and if the applicant has transferred any countable assets for less than fair market value during this five year period, he or she will become ineligible for MassHealth benefits for a period of time which is related to the value of the assets transferred. Important to note is that the disqualification period runs not from the date of transfer, but rather from the date when the individual enters a nursing home and is “otherwise eligible” for MassHealth coverage. In other words, the penalty period does not even begin until the individual applies for benefits.

Some feel that planning for MassHealth best requires planning ahead by transferring assets at least five years in advance of the time when a nursing home is likely to be needed. Of course, it is impossible to predict the future, so even the best planning may be thwarted by an unexpected illness. MassHealth planning necessarily requires that the individual give up all elements of ownership and control over otherwise countable assets, which is something that many clients are not comfortable doing, especially while still relatively young and healthy. The client must weigh the relative benefits of planning for MassHealth qualification against the risks of giving up all control and ownership of assets at a time that may be premature. Fortunately, there are steps an individual may take even at the last moment to protect at least some assets from being accessed to pay for nursing home care.

Because of the difficulties described above, LONG TERM CARE INSURANCE has become a very popular and well-advised product. A long term care policy may provide necessary funds to cover not only nursing home expenses, but many other in-home and community-based medical services as well. (MassHealth benefits will only pay for residential, institutional care.) The different options for long term care insurance are beyond the scope of this article, but if you are age 50 or older and concerned about paying for medical care as you age, investigating and procuring long term care insurance may be a worthwhile endeavor.

Massachusetts Uniform Probate Code

2011-12-27T11:09:00.000-08:00

Uniform Probate Code delayed to March 31

Almost three years ago, the Massachusetts legislature voted to adopt and implement the new Massachusetts Uniform Probate Code, which substantially changes the probate process in Massachusetts as well as matters relating to guardians, conservatorships and other matters under the jurisdiction of the Probate Court. The new law was to go into effect on January 2, 2012; however it has recently been announced that the House voted to delay implementation of the new Massachusetts Uniform Probate Code until March 31, 2012. The Senate is expected to vote similarly this week.

This does not come as a surprise to me, since as of last week one Probate Court clerk indicated that there are no forms or procedures yet in place to support the new procedures mandated by this law. This is not the first postponement of the Code's implementation. Time will tell whether the March 31 deadline will be met, or whether a further postponement will occur. So for now, probate in Massachusetts remains as it has for a century or more.

Some Further Thoughts About Owner's Title Insurance

2011-12-27T10:53:00.000-08:00

Back in 2008, I posted an article about whether or not one should purchase owners title insurance when purchasing real estate. In that article, I set out the many reasons why attorneys feel that owner’s title insurance is absolutely recommended and explained what benefits an owner’s policy will provide. Over the years, I have consistently advocated that my clients obtain the owner’s policy, and indeed I have always bought owners’ title insurance myself when buying a new property. I am confident that just about all of the real estate practitioners I know will also advise all clients to purchase owner’s title insurance.

Recently, however, I had a client express some reservations about purchasing the owner’s policy, because, as the settlement statement discloses, the closing attorney, as agent for the title insurance company, retains a portion of the premium as a commission for issuing the policy. This client felt that it was a conflict of interest for an attorney to recommend that a client buy owner’s title insurance when the attorney will receive compensation from the title company if the client does so. I completely understand this client’s unease, and indeed feel slightly uneasy about it myself. Nevertheless, there are several compelling arguments which counteract such perceived conflict, and those reasons bear repeating here:

1. The attorney takes on additional liability by issuing the title insurance policies. The attorney is responsible for the title examination, and if an error is made which results in a claim under the policy, it is possible that the title insurance company may have recourse against the attorney after settling a claim with the insured. The retained portion of the premium is compensation to the attorney for assuming that additional liability.

2. This is common practice in the insurance industry generally. Whether you are procuring life, auto, accident, disability or any other form of insurance, it is the norm that the agent is compensated by a commission for the issuance of a policy. Title insurance is no different.

3. For all of the reasons stated in my earlier article, it is generally agreed that an owner’s policy is a must. For most people, real estate is the biggest purchase they will ever make, and it is folly not to avail oneself of the protections an owner’s policy provides. While some may disagree, the majority of those who are experts in the real estate field will strongly encourage any buyer to spend the proportionately small additional, one-time premium and obtain an owner’s policy for maximum protection.

4. For better or worse, this is how real estate practice works in Massachusetts. No matter which attorney you retain to represent you in a real estate transaction, that attorney will no doubt also act as a title insurance agent, will issue whatever policies are applicable, and will thus earn a portion of the premium for such work. Any attorney with integrity will make recommendations based on the clients’ best interest, and not on their own self-interest. I certainly hope and believe that clients who retain me have complete trust and confidence in my skills and in my integrity, and know that I would never recommend any action simply because I stand to make more money rather than because it is in the best interest of the client.

So yes, this can be a thorny issue for some, and it is every buyer’s prerogative to decline to purchase the owner’s policy. In my view, however, it would be poor decision not to buy an owner’s policy simply because of concerns about a perceived conflict of interest. Trust your lawyer to give you the best advice available, even if it coincidentally means additional compensation to that lawyer. In my case, I can assure my clients with confidence that I will never put my own self-interest ahead of yours. That said, I will continue to recommend owner’s title insurance to each and every client I represent, not because I receive compensation, but because it is the smart thing to do.

Off the Radar

2011-12-27T09:53:00.000-08:00

As we can all see from the date of my last post, it's clear this blog has fallen off the radar, or at least relegated to the back burner, over the last several months. Many other more pressing matters interfered, but as I approach the New Year, one of my resolutions is to get back to a regular schedule of blogging in order to keep my loyal readers up to date with information and news on topic of interest. I have several ideas brewing... separate posts will follow, and apologies for my inattention to this.

Tips for Home Buyers

2011-05-22T15:15:00.000-07:00

The Boston Globe Magazine has a terrific article in today's issue on the topic of "building your brain trust" in preparation for purchasing a home or condo. It touches on all of the main points-- a good realtor, a good mortgage lender, a good home inspector and of course a good attorney are all crucial components to getting through the process with the proper protections and achieving the best outcome. I can provide excellent recommendations for brokers, inspectors and lenders, and of course I want to be your attorney! Don't miss this informative article: http://www.boston.com/realestate/news/articles/2011/05/22/building_a_home_buyers_brain_trust/.

Do I need life insurance?

2011-04-27T10:11:00.000-07:00

In the course of working with estate planning clients, I am often asked for my opinion about whether they should have life insurance, and if so how much. Generally, if you are not responsible for financially supporting anyone else, and you have sufficient assets to cover your liabilities, there is usually no need to purchase a policy. If, however, a spouse, children or anyone else relies on you for income or financial support, you should definitely have life insurance coverage in place. Upon your death, the proceeds of the policy will pass to your named beneficiaries to provide them with liquidity and a source of funds. It is often recommended that you maintain coverage in an amount at least large enough to pay off your mortgage. If you have young children, you may want it to cover higher education costs as well. Term insurance will be much less expensive than whole life, which includes an investment component, and the premiums for a term policy will generally be small money in relation to the amount of coverage and thus peace of mind the policy can offer.

One important point to all the stay-at-home parents out there: don’t think that just because you have no income, you don’t need life insurance. If the stay-at-home parent were to die, the survivor would spend a shocking amount of money in child and household care to replace the services that the deceased parent was providing for “free”. A life insurance policy on the life of the stay-at-home parent will provide an important source of funds to cover those costs.

How To Choose An Executor

2011-03-03T13:15:00.000-08:00

Here is a link to a very informative article in the New York Times on the process of choosing an Executor for your estate plan. http://www.nytimes.com/2011/03/03/business/retirementspecial/03EXEC.html?emc=tnt&tntemail1=y

Farewell, Lynna

2011-02-27T19:33:00.000-08:00

For the last eight years, Lynna Pallas Henderson has been my sidekick, my confidant, my conscience, my mind-reader, my confessor and my general “right-hand woman”. She has been the sunny voice on the other end of the phone line when you called, the happy face at the door when you came for our meeting, the one I could count on to make anything happen, and the glue that held so many things together. And now, the time has come for her to move on to the next adventure in her life. Lynna and her husband are relocating to Maine, where she will enjoy long-earned and much-deserved “retirement” at the family estate on the beautiful shores of the Atlantic. It’s hard to imagine life at the office without her, and I will miss her terribly, but I am so excited for her to begin the next chapter in her life. Lynna, my life has been immeasurably changed for the better for having had you in it. So in a nod to our mutual love of musical theatre, I turn to Stephen Schwartz with my farewell to you:

“I’ve heard it said that people come into our lives for a reason

bringing something we must learn, and we are led to those who help us most to grow, if we let them, and we help them in return . .

. . . So much of me is made of what I learned from you.

You’ll be with me like a handprint on my heart . . .

Because I knew you, I have been changed for good.”

Mortgage Broker Rule Changes

2011-02-20T20:48:00.000-08:00

Interesting article on changes to the rules regarding mortgage brokers and their fees . . . all part of a massive effort to better protect consumers in the mortgage industry. http://www.nytimes.com/2011/02/20/realestate/20mort.html?emc=tnt&tntemail1=y

My Facebook Page and Relevant News Articles

2011-02-13T20:33:00.000-08:00

I am kind of a news junkie... and in connection with my reading a whole lot of newspapers and online sources, I regularly post links to articles of interest on my Facebook page. Here are a couple of links to interesting articles in today's New York Times, one about calculating the APR in comparing mortgage products: http://www.nytimes.com/2011/02/13/realestate/mortgages/13mortgages.html?emc=tnt&tntemail1=y
and another about the new estate and gift tax laws: http://www.nytimes.com/2011/02/13/business/yourtaxes/13estate.html?_r=1&emc=tnt&tntemail1=y.

And of course, the link, once again, to the Facebook page itself: http://www.facebook.com/#!/pages/Law-Offices-of-Judith-R-Pike/118159531528358

Titling of Assets Matters!

2011-02-10T14:24:00.000-08:00

Having a Will and a even a Trust is not all you need to do for proper administration and disposition of your estate. The way you hold title to your assets will also play a large part in determining who receives your assets upon death. Here is a link to an excellent and very comprehensive article in today's New York Times on this important topic: http://www.nytimes.com/2011/02/10/business/10ESTATE.html?pagewanted=1&tntemail1=y&_r=1&emc=tnt

Estate Planning: Trusts for Your Pets

2011-01-28T11:00:00.000-08:00

Massachusetts has become the 44th state to permit residents to create legally enforceable trusts to provide for their pets’ care in the event of the owner’s death or disability.

The new law, which goes into effect in April, allows pet owners to create and fund a trust for the care of their animals after their owners have died. The trust appoints a trustee, selected by the owner, to care for the pet and disburse trust funds accordingly. The trust remains valid until a date specified by the owner or until the animal dies. Trustees are specifically prohibited from using any of the funds for purposes other than the care of a pet.

You can read the full text of the law here: http://www.mass.gov/legis/bills/house/186/ht01pdf/ht01467.pdf

Equal Rights for Hospital Visitation

2011-01-18T19:05:00.000-08:00

On Tuesday, January 18, 2011, new regulations concerning hospital visitation go into effect. These new regulations require all hospitals participating in Medicaid and Medicare programs – virtually every hospital in the country – to permit patients to designate visitors of their choosing and prohibit discrimination in visitation based on a number of factors, including sexual orientation and gender identity. These Regulations were promulgated at the urging of President Obama after learning of a tragic situation in which an LGBT family was kept apart as one of the couple lay dying in a hospital bed. As a result of these regulations, for the first time, lesbian, gay, bisexual and transgender (LGBT) people and their families across the country will have federal protections for a simple, yet immeasurably important right – to be able to be together when illness strikes. For more information, click here http://www.hrc.org/issues/15206.htm to go to the Human Rights Campaign’s Hospital Visitation Guide.

While this is a great victory, it should be noted that a number of health care issues related to LGBT individuals aren’t covered by the new regulations. It remains crucial to have the proper legal documents in place that will, among other things, permit one domestic partner to make health care decisions on behalf of the other.

A Little Promotion

2010-12-22T14:33:00.000-08:00

I received a wonderful and completely unsolicited email today from a client offering a testimonial that he invited me to share publicly on my websites. It may be bad form to be so self-promoting, but since he offered, I'll re-print it here, with many thanks to Steve Kelley (who was himself a fantastic client to work with):

2010: Judy Pike has provided exceptional legal services for our family real estate management company. In a recent transaction involving a complicated refinance of a commercial note, she did a great job balancing our own interests with the interests of our bank, making sure the deal got done. She is a hard-working attorney, timely, an most importantly, she and her staff kept their word in every step of the transaction. We also engaged her to rewrite our lease templates for commercial and residential accounts: Results - another terrific job and money well spent. Feel free to call me with questions about her company.

Sincerely,

Steve Kelley, President
KC Real Estate, LLC
http://www.kcrem.com/

New Massachusetts Homestead Law

2010-12-21T13:47:00.000-08:00

Governor Patrick has just signed into law a new bill which clarifies and improves the Homestead protections afforded to Massachusetts homeowners. The new bill provides an automatic protection of up to $125,000.00 of equity in a primary residence against claims of most creditors. Formerly, Homestead protection was available only to those homeowners who filed a Declaration of Homestead at the Registry of Deeds. Under the old law, the filing of a Declaration of Homestead protected up to $500,000.00 of equity against claims of creditors. This $500,000.00 protection is still available by filing a Declaration of Homestead, but even without a filing, you are now automatically protected up to $125,000.00. In addition, the new law clarifies that the Homestead protection remains intact if the property is conveyed to another family member, or to a trust for estate planning purposes, or if you refinance your home mortgage. This long-overdue and highly welcomed law goes into effect in mid-March.

New Estate Tax Laws Enacted

2010-12-18T08:28:00.000-08:00

Just under the wire, Congress has enacted new tax laws with respect to federal estate, gift and generation skipping taxes. Under this law, beginning in 2011 the estate and gift taxes are reunified and the exclusion/exemption amount is set at $5 million per person. The maximum rate is reduced to 35 percent. The generation-skipping transfer tax exemption is also raised to $5 million, with a maximum tax rate of 35 percent. The act includes a "repeal of the repeal" of the prior estate tax laws, so for decedents dying in 2010, rather than there being no Federal estate tax, the fiduciaries may elect whether to subject the the estate to the previously existing laws or the new ones about to take effect. These provisions sunset at the end of 2012.

For an interesting analysis of the new estate tax provisions, see this article in today's New York Times: http://www.nytimes.com/2010/12/18/your-money/taxes/18wealth.html?emc=tnt&tntemail1=y.

Duties Of An Executor

2010-12-09T13:03:00.000-08:00

When a loved one dies, often a family member will have been named in the Last Will and Testament as the Executor of the deceased’s estate. What are the responsibilities of the Executor?

The Executor will have three main responsibilities. The first is to collect and manage all probate assets of the decedent. The second is to pay all liabilities of the decedent. The third is to distribute all probate estate assets to the named beneficiaries.

As soon as practical following the death of the principal, the Executor should contact the attorney who assisted the decedent with preparation of the estate plan to obtain the original Will and begin the probate process. In order for an Executor to have the power to undertake the various duties, he or she must first be appointed by the Probate Court. A Petition for Allowance of Will, together will accompanying documents, must be filed with Probate Court in the county where the decedent resided. Notice to heirs must be given and a copy of the Petition must be published in a local newspaper. Following satisfaction of procedural requirements, the Court will issue a Citation allowing the Will and appointing the petitioner as Executor.

Once appointed, the duties of the Executor will include:

• Locating the decedent’s important papers and gathering information about all assets owned by the decedent.
• Contacting each institution holding such assets and effectuating the transfer out of the decedent’s name and into an estate account or accounts.
• Filing claims to obtain certain payments to which the estate may be entitled, such as life insurance proceeds, Social Security benefits, Veteran’s benefits or employer pension and insurance benefits.
• Gathering paperwork regarding all liabilities and claims by creditors of the decedent, and arranging for payment of those liabilities.
• Selling assets of the estate as directed in the Will, or for cash requirements.
• Investing estate assets to generate income during the period of administration.
• Filing estate tax returns, if necessary, within nine months of death, and income tax returns.
• Dividing and distributing the net estate assets to the beneficiaries in accordance with the terms of the Will.
• Filing an Inventory, and ultimately a Final Accounting, with Probate Court.

If a decedent owned assets in trust, or jointly with another person, or in a form that allowed the decedent to designate a death beneficiary, those assets will pass outside of the probate process in accordance with the procedure applicable to such assets. While not strictly within the probate estate, oversight of those assets by the Executor may be necessary in order ensure the orderly administration of the decedent’s overall estate.

Of course, an article such as this cannot cover all of the possible scenarios in attending to the estate of a decedent. Consultation with a qualified probate attorney (such as myself!) will be important to proper administration.

"Avoid Contractor Rip-offs"

2010-12-05T20:25:00.000-08:00

This http://www.boston.com/lifestyle/house/articles/2010/12/05/avoid_contractor_rip_offs/is a terrific piece in today's Boston Globe Magazine on how to protect yourself when hiring a contractor. A good follow up to my blog post from this past September and worth reading!

My Facebook Page

2010-12-05T09:41:00.000-08:00

Just want to remind everyone that I also have a Facebook page for "Law Offices of Judith R. Pike", where I post links to news stories of interest to my readers. Here's the link: http://www.facebook.com/#!/pages/Wellesley-MA/Law-Offices-of-Judith-R-Pike/118159531528358. Please click "like" to become a follower of this page and receive regular updates of new postings.

Borrowing From Your Parents

2010-11-05T18:22:00.000-07:00

Interesting article in today's New York Times about borrowing money from family members as an alternative to an institutional mortgage. http://www.nytimes.com/2010/11/05/business/businessspecial5/05MORTGAGE.html?emc=tnt&tntemail1=y

What Is A Will, and Why Do I Need One?

2010-10-26T14:17:00.000-07:00

Nobody wants to think about the fact that we will all die someday, but responsible planning includes setting your affairs in order so that your family and loved ones are taken care of if something should happen to you. A Will is simply a document that sets out your instructions for how you want your assets to be distributed after your death. It ensures that your assets are passed on the people you want and provides for orderly distribution of those assets. It may also serve to avoid or eliminate disputes among your beneficiaries. If you should die without a Will, your assets will be distributed according to a statutory scheme, which may not be the same as what you would otherwise choose. Any person of any age, 18 or older, who owns assets, real or personal, should consider establishing a Will.

To be valid, a Will must be in writing and must be witnessed and notarized. The witnesses and notary must verify that the creator of the Will was of sound mind and executed it freely and voluntarily, without any undue influence. A handwritten Will without proper execution will not be validated in most cases. A Will once executed remains valid unless and until revoked by the creator (or, as to a spouse, until a divorce). It may be changed at any time that you wish.

If you have minor children, a Will is also the place where you would designate guardians to take legal custody of your minor children in the event both parents are deceased. (See my blog post dated December 9, 2008 for more on the topic of guardians.)

Not all property passes according to a Will. Only property which you own in your individual name with no beneficiary designation will pass under the Will. Certain assets, such as life insurance and retirement accounts, will pass instead directly to the beneficiaries of those assets. Jointly held property also passes not through the Will but instead to the surviving joint owner. In determining distribution of your assets, therefore, you must consider beneficiary designations and the way you hold title to property as well as the terms of your Will.

Wills may be simple or more complex depending on your particular circumstances. It may be just one of several components in a proper estate plan. Establishing a Will is an important first step in putting all of your financial affairs in order. The assistance of an experienced estate planning attorney is crucial to the successful completion of this task.

CONSIDERATIONS WHEN BUYING NEW CONSTRUCTION

2010-09-03T08:52:00.000-07:00

If you are buying a property currently under construction, there are several additional factors to take into account beyond those of the customary purchase of an existing property. Following are some considerations which should be addressed in any contract for the purchase of new construction:

1. TIMING: the builder will project a completion and closing date which will be incorporated into the purchase and sale agreement. Notwithstanding, home builders generally provide the right to extend a completion and closing date for periods of up to 120 days from the originally projected date to protect against construction delays. If you are buying new construction, be sure you have a contingency plan for storage of your possessions and somewhere to live in the likely case your closing is delayed.

2. INSPECTIONS: a purchase and sale agreement should always give the buyer the right to do a comprehensive inspection of the property at the completion of construction but prior to closing to ascertain that the property has been constructed in accordance with all plans and specs. Once you close, you lose the right to object to property condition except as may be covered by a builder’s warranty.

3. “SUBSTANTIAL COMPLETION” AND UNFINISHED WORK: It should be a condition of any purchase and sale agreement that the builder deliver a final and unconditional Certificate of Occupancy from the building department before closing occurs. Without this, the property is not certified as complete or legally habitable. Yet even if a C.O. has been issued, it is possible, even probable, that there may be a “punch list” of smaller items not yet finished which will be completed after the closing. In your final inspection, you and the builder should develop a “punch list” of unfinished work so all parties have a common understanding of what remains. Ideally, for maximum protection, a buyer should seek a holdback from the builder’s sale proceeds in an amount at least equal to the value of the unfinished work (one and one-half times the value is better), with such funds being held in escrow by buyer’s attorney until the punch list is completed. Many builders, however, will not agree to holdbacks in any circumstances. In that case, the buyer is limited to a contractual obligation on the builder’s part to complete the punch list within a stated period of time following closing.

4. COMMUNICATION: it is imperative to keep in regular communication with the builder and conduct periodic inspections to ensure that the property is being completed as agreed. It is much easier to fix a problem as it occurs than to have to go back much later and try to remedy non-compliance.

5. WARRANTY: always seek a written one-year warranty from the builder covering structural and systemic matters and warranting against any defects in materials or workmanship.

If you are buying new construction, keep these matters in mind, and seek the assistance of a qualified attorney to negotiate your purchase and sale agreement so these items are incorporated into the contract.

Property Owners Beware

2010-08-22T16:15:00.000-07:00

I have posted about this in the past, but it bears repeating. In the mail this week I received an official-looking notice from an operation called National Record Service Inc. It referenced the official recording data for my house deed, and went on to state that "The U.S. Government Federal Citizen Information Center website recommends that property owners should have an official or certified copy of their deed." For the low one-time price of just $59.50 (which generously includes shipping and handling charges), National Record Service Inc. will obtain and send you a copy of this valuable document.

People, please DO NOT be taken in by this scam. Copies of your deed are available FOR FREE (or for a nominal photocopy charge) at the registry of deeds in the county in which your property is located. It is nothing short of highway robbery to part unsuspecting homeowners from $59.50 of their hard earned money for this purpose. This kind of stuff just makes my blood boil.

Health Care Proxies

2010-08-10T12:02:00.000-07:00

One important component of a comprehensive estate plan is the execution of a Health Care Proxy. A Health Care Proxy is a document that allows the principal to appoint an agent with the legal authority to make medical and health care decisions on his or her behalf in the event of incapacity. The agent is legally empowered to authorize or withhold medical care in accordance with his or her best interpretation of the wishes of the principal. Because the agent must make such decisions and directions, a comprehensive Health Care Proxy will also include the principal's expression of wishes regarding types of medical care to be withheld or provided in the event of a terminal illness. Typically, the principal will be asked to express preferences regarding (a) do-not-resuscitate orders, (b) artificial respiration, (c) artificial nutrition, (d) major or minor surgery, (e) chemotherapy and other medications, and (f) a variety of other medical procedures. If you are embarking on the preparation of an estate plan, you would be well advised to consider who you would trust with making health care decisions on your behalf, and whether you would wish such medical procedures to be withheld or provided in the event you have a terminal condition and are unable to make such decisions on your own. A comprehensive Health Care Proxy can ensure that your wishes on this important subject will be carried out in accordance with your expressions.

Estate Planning articles

2010-07-16T07:09:00.001-07:00

A couple of good articles in the New York Times about estate planning to share:
http://www.nytimes.com/2010/07/16/business/global/16iht-nwestate.html?pagewanted=1&tntemail1=y&_r=1&emc=tnt

also http://www.nytimes.com/2010/07/16/business/global/16iht-nwcheck16.html?emc=tnt&tntemail1=y, simple but clear and good advice.

What is a Trust?

2010-07-13T08:38:00.000-07:00

Trusts of all kinds are widely by estate planning attorneys as excellent vehicles to assist in the management and disposition of assets. But what, exactly, is a Trust?

Think of a Trust as a box, or a holding tank. It is a legal entity that can hold title to all sorts of property for the benefit of one or more people or entities. The box contains a set of instructions that set out how the property is to be held, managed and ultimately distributed. Assets are placed into the box by an individual, thereby segregating them for a stated purpose.

A Trust is created by an individual known as the Settlor, Grantor or Donor (these terms are interchangeable). The Trustee is an individual or institution charged with the responsibility of carrying out the instructions for the benefit of the Beneficiaries, those given an interest in the property by the Trust’s terms. A Grantor may also be a Trustee and/or a beneficiary at once.

Trusts may be "inter vivos", created during the Grantor’s lifetime, or "testamentary", meaning they may come into play only upon death. Trusts are also revocable or irrevocable. A revocable Trust can be modified, amended or revoked by the Grantor; an irrevocable Trust cannot.

Trusts may be created for a multitude of purposes. Some common uses of trusts include:
1. Avoidance of probate upon death.
2. Reguation of control over the amount and circumstances of distribution.
3. Holding assets for the benefit of young children before they reach an age appropriate for outright distribution.
4. Protecting assets used by a surviving spouse for the benefit of children in the event of remarriage by the surviving spouse.
5. Funding housing, education or special needs costs for the beneficiaries.
6. Sheltering assets against liability for estate taxes.
7. Creating charitable tax shelters.

Creating a Trust is just one part of the process, however; once a Trust is created, it must be properly funded in order to achieve the purpose for which it was established.
The benefits of the trust will only apply to those assets which are actually transferred into it, which means putting appropriate assets into the name of the trust.

A Trust is a very flexible tool for achieving a wide range of estate planning goals. Ask me about a Trust and whether it might be right for your needs.

Time for a Rant

2010-06-21T12:10:00.000-07:00

OK, it’s time for a rant.

I have, to date, limited my postings in this space to useful information relating to legal topics, but lately I feel like the general level of civility in our society has taken a nosedive off a cliff and I have been at the bottom of the pit breaking the fall. I long for the kinder, gentler days when people had manners, and compassion, and something more than just a self-focused need to be number one at all times. For the most part I love my career and I love my clients and colleagues, but in the last year I have come across enough challenges that a reminder feels warranted.

So here are Judy’s top ten rules for the proper care and feeding of your faithful lawyer:

1. Be reasonable about deadlines. There is, for the most part, no such thing as a real estate or estate planning emergency. If your children are 10 and 8 and you have not had a will for the duration of their lives, don’t suddenly remember 3 days before both parents are scheduled to get on a plane together that you forgot to do a will and expect your lawyer to be able to produce an entire estate plan in 48 hours. If you have a two-week deadline, don’t wait until the 12th day to hire a lawyer and then expect it to be done on time.

2. Be faithful. If you have a relationship with your lawyer, and you are happy with that person’s service, trust that (s)he will be there for you. Don’t go off and hire someone else if (s)he doesn’t return your phone call within 3 hours of your sending an email.

3. Listen to your lawyer’s advice. If your lawyer is recommending a certain course of action, it should be for your best interest, so don’t then go off and do something completely contrary to that advice without at least discussing it first with your lawyer. And for goodness sake, stay away from legal forms found on the internet!

4. Respect your lawyer’s or colleague’s work product, documents and other written materials. As Abraham Lincoln once said, "a lawyer’s time and advice is his stock in trade". If you have work product in your possession, don’t clone it for your own use without consent, or make changes without notification, or otherwise use the work product in ways that are inconsistent with the lawyer’s intentions.

5. On a related note, don’t expect free advice. If you call or email your lawyer to "run something by" him or to "pick her brain" on a topic, expect to be billed for that. Even if it’s a 10 or 15 minute phone call, those small increments can add up to a lot of uncompensated time.

6. Understand that your lawyer cannot control all events in a transaction and is not responsible for everything that happens. If you sign a contract to buy a house that requires you to borrow more money than you can qualify to get, or more cash than you have in the bank, it will never be the lawyer’s fault when the deal falls apart, as much as you might like to blame him/her. Do your homework, be prepared, and take responsibility for your part.

7. Respect that lawyers are people too. They have spouses, and children, and aging parents, and aging bodies that sometimes need medical attention, and other obligations that sometimes interfere with their ability immediately to return a phone call or an email, or produce work product. If you have no actual deadline, and your lawyer is generally responsive, cut them some slack when necessary.

8. If you are another lawyer in a transaction, don’t make it personal. The actions of a good opposing counsel are not (or should not be) personal, but instead simply the zealous representation of the client’s interests are required by our canons of ethics. Maintain civility.

9. Institutions, this one’s for you: don’t make your attorney do all the work for the same transaction multiple times. There is nothing more frustrating than spending two hours preparing a closing only to be told there is an error in the documents and everything will have to be done again. Do your homework in advance and respect your attorney’s time. And if due to some unavoidable event a big chunk of work has to be duplicated, then at least have the courtesy to apologize—and mean it—instead of just assuming we have nothing better to do but clean up after your mistakes.

10. Be nice. No matter what, there is just no reason not to be. And everything is easier when you are.

Annuities and Estate Planning

2010-06-15T10:58:00.000-07:00

I am often asked by my older estate planning clients what they can do to protect their assets in the event they need to enter a nursing home. Under the regulations governing Masshealth financial eligibility, many assets would need to be spent down to pay for such care before benefits would accrue, but certain assets are exempt from countability. Once excellent way to protect assets for couples where one spouse is in the community and the other is in a nursing home is by the purchase of an annuity. While the payments from an annuity are countable as income, the community spouse may use excess and otherwise countable assets to purchase an immediate, irrevocable monthly annuity, and the purchase of such will not be considered a transfer which disqualifies the institutionalized spouse from eligibility for Masshealth benefits so long as the technical requirements of the regulations are met. The term of the annuity may not exceed the annuitant’s life expectancy and should generally be as short as possible. At the end of the term, when the annuity converts to cash in the name of the community spouse, that cash will not be considered a countable asset. Of course, if you are considering the purchase of an annuity as an asset protection technique, you should seek the advice of competent counsel to advise you on the necessary terms and procedures, but consider the use of annuities as an effective estate planning and asset protection tool.

Mortgage Interest Rates are Down Again

2010-05-27T10:58:00.000-07:00

Besides being the most amazing assistant any professional could ask for, my intrepid sidekick Lynna Henderson is a news junkie. Thanks to her for pointing out this article in today's Wall Street Journal http://online.wsj.com/article_email/SB10001424052748704269204575270554112427046-lMyQjAxMTAwMDIwNzEyNDcyWj.html . If you missed the last refinancing wave, now is your opportunity!

Come to my Facebook page

2010-05-13T13:15:00.001-07:00

I want to invite everyone to my office's new Facebook page. Become a fan! Follow frequent posts on timely news articles and other relevant legal topics. Click here: http://www.facebook.com/#!/pages/Wellesley-MA/Law-Offices-of-Judith-R-Pike/118159531528358?ref=ts

Underground Oil Storage Tanks

2010-05-13T13:07:00.000-07:00

If your home is heated by oil heat, you should be aware of a new law going into effect on July 1, 2010. The the "Oil Heating System Upgrade and Insurance Law" requires homeowners with oil heating systems that were installed before 1990 to install either a sleeve around the pipe that feeds the burner or a safety valve to prevent leaks. The new law also allows all homeowners to buy insurance coverage for the cleanup of a leak if their system is in compliance. If you have an oil tank and have not had it examined for compliance with this law, you are advised to do so before July 1.

If your oil tank is underground, you should be very diligent about ensuring that the tank is not leaking. The older the tank, the more likely it may be. Even if there is no current leak, you may want to consider removing the underground tank and replacing it with an above ground tank in your basement or a shed. Massachusetts state law does not mandate the removal of a residental underground tank if it is not leaking, but there may be local requirements in the municipality in which you live. Your local fire department can tell you about its requirements.

If you are planning to sell your home, you are likely to find that even if the underground tank is not leaking, a buyer will want it to be removed as a condition of the closing. If you are planning to put your house on the market, you should consider removing the underground oil tank before you do so. Removal should be done by a licensed and qualified contractor. The removal must be done in accordance with all state and local requirements, pursuant to a valid permit, and with the supervision of the local fire department. When the work is completed, obtain written documentation and certification from the fire department to verify the proper removal of the tank so you can provide that to potential buyers.

Witnesses to a Will

2010-05-06T11:26:00.000-07:00

In Massachusetts, for a Will to be valid, it must be in writing, signed by an individual eighteen years of age or older and of sound mind, and attested and subscribed in his presence by two or more competent and independent witnesses and a notary public. Does this mean the witnesses must be physically present at the time the testator’s signature is affixed to the instrument? According to a recent Massachusetts Appeals Court decision, the answer is no. In the case of Jones v. Ouellette, the court found that a will was properly attested even though the testator signed the Will before the two witnesses entered the room and there was no conversation between the two witnesses and the testator. It is settled that it is not necessary for the witnesses to observe the testator actually sign the Will so long as he or she acknowledges the signature and stating it to be his or her Will. In the present case, the Court concluded that it was not also required that the testator verbally affirm that the signature was his, where the witnesses observed and it was readily apparent that the signature was the testator’s, and no attempt was made to conceal the signature.

10 Things Buyers Need to Know

2010-04-30T16:08:00.000-07:00

The April 29, 2010 issue of the Boston Globe's G/Style Section included an excellent article setting out ten important things buyers of real estate should know when entering the marketplace. Read this informative piece here http://www.boston.com/yourtown/needham/articles/2010/04/29/10_things_to_know_if_youre_buying_a_home_now/

Unemployed? Mortgage Relief May Be Available

2010-04-23T11:24:00.000-07:00

The Obama administration recently announced modifications to the Home Affordable Modification Program (HAMP) in an effort to promote stability for the housing market and offer further assistance to unemployed homeowners having difficulty making mortgage payments. Under these modifications, mortgage holders are required to offer forbearance plans to all qualified jobless borrowers for at least three and as long as six months. Under the plan, monthly payments can be reduced to 31% of income or less, or even suspended entirely. Borrowers must meet HAMP eligibility requirements as well as submit evidence that they are receiving unemployment benefits. They must also be in their first 90 days of delinquency. For details on the current program, click here: http://makinghomeaffordable.gov/docs/HAMP%20Improvements_Fact_%20Sheet_032510%20FINAL2.pdf.

Whole Life Insurance Or Term?

2010-04-21T11:05:00.000-07:00

Whole life or term insurance? Syndicated columnist Scott Burns has an answer I agree with in today's Boston Globe. http://www.boston.com/business/personalfinance/articles/2010/04/21/whole_life_insurance_or_term_the_answer_depends_on_your_financial_needs/

To FSBO Or Not To FSBO?

2010-04-20T09:56:00.000-07:00

You want to sell your home but you are concerned about the high cost of a broker’s commission on the sale. Should you try to sell it directly, without a broker?

In a good market, a For Sale By Owner transaction (FSBO), may not be very difficult, if you have the time and energy to invest in marketing the house properly. In a slower market, it is much more difficult to get the word out about your home, even with all of the internet resources available in the marketplace. Many who first attempt a FSBO do end up listing with a realtor.
If you are considering a FSBO listing, the following should be considered:

1. Price the home correctly. Regardless of what you think your house is worth, an overpriced property will not sell quickly. Look at recent comparable sales in the area, seek the opinion of experts, and be realistic. A new property on the market generates the most interest.

2. Put your home’s best face forward. Eliminate clutter, remove extraneous furniture, and stage the property to look its very best before showings. Repair any obvious defects, and consider improvements to maximize your property’s appeal.

3. Be willing to spend money on advertising, and use the advertising to get the word out to your target audience.

4. Hold one or more open houses. Advertise these widely, put up signs in the neighborhood, and make it easy for people to find your property. Make sure the house is well lit. Prepare a "fact sheet" showing all of the relevant factual data that a prospective buyer would want to know, and also provide written materials available about the school district, the city or town and other relevant topics. Resist providing any discretionary information about the property, however, as it will be the responsibility of the buyer to do a thorough property inspection.

5. Be flexible about scheduling showings with interested parties at other times.

6. Decide whether you are willing to pay a cooperating fee (generally 2.5 to 3 percent) to a buyer’s broker. If you are, you are likely to widen you potential market and receive inquiries by brokers working with buyer clients.

7. Have a good real estate attorney standing by to assist you when an offer is presented, and consult with that person before accepting a written offer.

If you do go FSBO, be prepared to work hard and invest a lot of time. The value of an experienced and professional realtor is often underappreciated, and once you take on the task of selling your home yourself, you may find that the services provided by a qualified realtor are worth their cost.

Caring for Aging Parents

2010-04-17T05:49:00.000-07:00

Adult children of aging parents will inevitably face the difficult task of assessing when and whether their parents are able to continue to live independently, and what to do if and when they are no longer able to do so. This excellent article on the AARP website gives guidance on how to perform an assessment of your parents' mental, physical, environmental and financial conditions to determine their ability to remain safely independent. http://www.aarp.org/families/caregiving/caring_parents/a2003-10-27-caregiving-needhelp.html

Extended Deadline for Some Massachusetts Tax Return Filers

2010-04-15T09:43:00.000-07:00

The April 15 deadline for filing federal and state tax returns has been extended until May 11 for many taxpayers in Massachusetts due to the severe rain and floods we experienced in March. The extension is granted to those counties in the state which were declared federal disaster areas as a result of the floods, including Bristol, Essex, Middlesex, Norfolk, Plymouth, Suffolk, and Worcester. There is no need to file anything to take advantage of this extension so long as you meet the extended deadline of May 11. Late filers, you just got more time to procrastinate!

First-Time Home Buyer Tax Credit

2010-04-09T13:30:00.000-07:00

If you are thinking about buying a house in order to claim the first time home buyer credit, it’s time to act. First-time home buyers can get a credit of up to $8,000, but you must sign a purchase and sale agreement by April 30, and close on or before June 30. If you have not owned a home in the last three years, you are eligible to receive a tax credit of ten percent of the purchase price, up to a maximum of $8,000. Even if you have owned a home before, if you buy a new home having owned and lived in your current home for at least five consecutive years out of the last eight years, you will be eligible for a tax credit of up to $6,500. The credit is claimed by filing an additional IRS form with your federal tax return for the year of purchase. If you bought a new home in 2008 or 2009 and have already filed your return without claiming the credit, you may amend your return for that purpose. Now the catch: there are income limits to the availability of the full credit. For purchases after November 6, 2009, your adjusted gross income cannot exceed $125,000 for singles and $225,000 for marrieds filing jointly. For purchases before November 7, 2009, the limit is $75,000 for singles and $150,000 for marrieds filing jointly. So come on, first time buyers—get out there and help stimulate the real estate market AND get a tax credit at the same time.

New Laws Regarding Smoke Detectors in Massachusetts Residential Properties

2010-04-07T10:49:00.000-07:00

Sellers of residential property have long been required to deliver their properties equipped with smoke detectors (and since 2005, carbon monoxide detectors) in compliance with Massachusetts law, to have the property inspected by the local fire department, and to obtain and deliver at closing a certificate evidencing the compliance of the property with those laws. A new law has just gone into effect which modifies the smoke detector requirement.

Effective yesterday, the smoke detectors in any home being sold which is built before 1975 and relies on the old battery operated version must be upgraded to contain photoelectric smoke detectors as well. Photoelectric smoke detectors use light rather than radiation to detect smoke, and are are most effective in detecting smoldering or slow moving fires. Photoelectric smoke detectors must be installed within 20 feet of kitchens or bathrooms containing showers. Areas beyond 20 feet require both photoelectric and ionization smoke detectors, either in the form of a single dual detector or two separate detectors.

If you are selling, or planning to sell, your home, you should be aware of this new requirement and ensure that your smoke detectors are in compliance before scheduling your fire department inspection.

Jumbo Mortgages

2010-04-05T08:50:00.000-07:00

If you have been in the market for a jumbo residential mortgage loan (over $417,000, with some exceptions) in the past year, you know how difficult it is to get that type of financing, and the rates have been most unattractive. Good news-- the New York Times is reporting that the stranglehold on jumbo mortgages is loosening up, and those loans are becoming more available at more attractive rates. Read all about it at http://www.nytimes.com/2010/04/04/realestate/04mort.html?emc=tnt&tntemail1=y. The article focuses on the New York tri-state area, but if it's happening there, it's bound to be happening in Massachusetts as well.

Estate Planning: Keep that Paperwork Organized!

2010-03-26T08:50:00.000-07:00

The March 24, 2010 New York Times has a great article on the importance of making sure not only that your estate planning documents are in order and up to date, but also that your beneficiary designations, titling of assets and general paperwork are in order so that your heirs can easily manage your estate in the way you intend. It's worth reading this article, so click here: http://www.nytimes.com/2010/03/25/your-money/estate-planning/25ESTATE.html?emc=tnt&tntemail1=y. I do (of course) take exception to the statement that a Will can be easily facilitated by the use of an online do-it-yourself site; there is simply no substitute for the advice of a competent estate planning attorney who will do a comprehensive review of your assets and general needs, since there is far more to the process than just slapping some words down on paper and calling it a Will. The article does, however, give good food for thought. Have you done your estate plan yet? If not, call me and I can help make it happen in an efficient and complete manner.

Estate Planning as a Family Conversation

2010-03-09T09:18:00.000-08:00

The March 4, 2010 edition of the New York Times has an interesting article encouraging adult children to help their parents ensure that their estate plans are up to date. Sometimes a loving prompt is needed to put things in order. Read this piece at http://www.nytimes.com/2010/03/04/business/04ESTATE.html?emc=tnt&tntemail1=y.

Privacy, Please

2010-03-02T15:07:00.000-08:00

On March 1, 2010, new standards went into effect in Massachusetts for the protection of personal information in both paper and electronic records. Mass. CMR Section 17.00 applies to all persons that own or license personal information about a resident of the Commonwealth.

Every person that owns or licenses personal information about a Massachusetts resident is now required to develop, implement, and maintain a comprehensive WRITTEN information security program and physical safeguards that are appropriate to the individual business and the amount and type of personal data maintained. The regulation applies to those "engaged in commerce", i.e. those who collect and retain personal information in connection with the provision of goods and services or for the purposes of employment. Businesses are required to designate an employee to maintain the security program, to institute policies for safeguarding personal information, and to establish and maintain a secure computer/electronic system to the extent the personal information is stored electronically, including firewall and encryption capabilities. Important to those of us operating largely over the internet is the concept that any personal information transmitted wirelessly must be encrypted to bring about a "transformation of data into a form in which meaning cannot be assigned", meaning that the data must be altered into an unreadable form. Password protection alone is not sufficient and would not satisfy the encryption standard.

The new rule adopts a risk-based approach to information security, directing a business to establish a written security program that takes into account the particular business' size, scope of business, amount of resources, nature and quantity of data collected or stored, and the need for security.

The state Office of Consumer Affairs and Business Regulation developed a compliance checklist to assist small businesses comply with these regulations. These can be found at http://www.mass.gov/Eoca/docs/idtheft/compliance_checklist.pdf.

"Thoughts While Shaving": The Financial Cost of Being a Same-Sex Couple

2010-01-08T11:42:00.000-08:00

Regardless of how you feel politicially or morally about the legalization of gay marriage, it is a truth that it is more expensive to be a same-sex couple than a heterosexual couple. Here are just some of the ways that the benefits and costs differ:

1. Social security: certain benefits available to married couples are not available to gay couples. Same-sex couples are not entitled to spousal benefits, survivor benefits or the flat death benefit.

2. Health insurance: Many domestic partners are not eligible to participate in the other’s employer-sponsored health insurance plans. The cost of procuring separate health insurance for each can be substantially higher than if both were on the same plan.

3. Estate taxes: Heterosexual married couples can transfer an unlimited amount of assets to each other during their lives and at death without paying any federal estate or gift taxes. That exemption does not extend to same-sex couples, even if their marriages are recognized in the state where they reside.

4. Retirement accounts: spousal benefits available to married couples with respect to retirement funds are not available to same sex couples.

5. Income taxes: In many cases, two domestic partners filing separate income tax returns will pay, in the aggregate, more in taxes than a married couple with the same financial picture. In addition, accountant's fees will be higher since two returns must be prepared and filed, rather than one.

6. Legal protections: Married and unmarried same-sex couples are encouraged to create legal documents that attempt to replicate the protections and rights that heterosexual married couples automatically receive by law. The cost of preparing estate and other legal documents to replicate the same rights available to married couples may be substantially higher than estate planning costs for heterosexual couples.

Food for thought.

More on Estate Taxes

2009-12-28T09:58:00.001-08:00

The New York Times editorial staff weighs in with their views on the state of federal estate tax laws. Read this editorial at http://www.nytimes.com/2009/12/28/opinion/28mon1.html?emc=tnt&tntemail1=y

What's Going On With Federal Estate Taxes?

2009-12-20T13:28:00.000-08:00

The status of the federal estate tax is in serious flux. The problem dates back to 2001, when Congress passed an estate-tax law that increased the size of estates subject to tax on a sliding scale over a period of 10 years. Until December 31, 2009, the federal exemption is $3.5 million, but on January 1 the estate tax disappears entirely only for 2010. In 2011 it is reinstated with an exemption of $1 million. Changes to the Generation Skipping Tax rules and Gift Tax rules are also imminent. When this law was first passed, it was jokingly referred to by some as the “throw momma from the train” law, on the theory that children of the very wealthy would start knocking off their parents in 2010 in order to inherit all the wealth without any tax liability.

Nobody would have thought we would get to the end of December 2009 without some further revisions to the laws, but here we are. The uncertainty of these laws and the failure of Congress to provide firm direction has thrown estate planners into a tailspin.

The House of Representatives voted this month to make the current law permanent, but the Senate rejected the extension as voted by the House. With just days to go, an extension of the current law before things change seems in doubt.

So what happens if the law is not extended at the $3.5 million level? Conventional wisdom says a law will be enacted that will be retroactive to January 1, 2010, but some legal scholars argue that a retroactive law would be unconstitutional and are certain that it will face legal challenges.

Interesting times, folks. Stay tuned.

Good News for Boston Area Borrowers

2009-11-22T07:27:00.000-08:00

The residential mortgage market has long made a distinction between two categories of mortgage loans depending on the amount being borrowed. “Conforming loans” are those up to a stated ceiling amount (currently $417,000) and “jumbo loans” are those in amounts above the conforming limit. Rates have historically been higher for jumbos than for conforming loans, and for some time now the differential in rates between conforming and jumbo loans has been substantial, making it significantly more expensive to obtain mortgages in high loan amounts.

As part of the 2008 economic stimulus package, Congress increased the ceiling amount for conforming loans in certain high cost areas around the country. In the Boston area, the conforming loan ceiling was raised to $523,750 for 2009. This has allowed borrowers to obtain higher mortgages at conforming rather than the higher jumbo rates. Congress recently passed legislation extending the increased ceilings through December 31, 2010. So for another full year, the conforming loan limits in the Boston area for single family homes and condominiums will remain at $523,750.

This is good news for those of you in the Boston area looking to purchase or refinance, as it remains possible for another year to obtain that higher loan amount at lower cost.

Attorney Representation in Residential Purchase and Mortgage Transactions

2009-11-17T12:50:00.000-08:00

I represent many buyers of residential real estate, and I am often asked by clients whether or not I can, or should, represent the mortgage lender as well. This is a good question, and one worth spending a moment to discuss.

In Massachusetts, a residential mortgage loan must be prepared and closed by an attorney. In this context, the attorney represents the lender, but it is fairly common for a buyer to ask the mortgage lender to permit their own attorney to close the mortgage loan as well. Although a technical conflict, it is a conflict that is regularly waived by both buyer and lender because the interests of both parties are largely the same. Both want clear title, proper documents and all other matters to be in order for closing. It is extremely rare that the interests of buyer and lender become adversarial, but in those rare cares, an attorney acting in dual representation would be required to withdraw. In over 25 years of practicing real estate law, and in representing both buyer and lender in a majority of those cases, I have never been required to withdraw due to a conflict between the parties.

In my view, there are two compelling advantages to a buyer in having the buyer’s attorney close the mortgage loan: quality control and cost savings. From a quality control standpoint, most buyers feel there is comfort in knowing that the attorney they have engaged is also the one responsible for the important pieces of due diligence and preparation needed to get to closing, rather than an attorney other than the one they selected and with whom they may not be familiar. As to cost, regardless of who represents the lender, one of the buyer’s closing costs will be an attorney's fee to the lender's attorney to close the loan. This is generally a fixed fee determined by the lender and the attorney and quoted to the buyer on the good faith estimate of settlement charges. Because an attorney representing only the lender generally will not be involved with any matters outside the scope of the loan closing, a prudent buyer will also engage an attorney to handle the negotiation of the purchase and sale agreement and and any other matters that may arise strictly between buyer and seller. Depending on the buyer’s wishes, this personal representation may end upon execution of the P&S or may continue through and including the closing, and naturally, the buyer will pay a separate fee to the attorney for these services. If two attorneys are involved, there is a probability of overlap in the effort to reach the closing table, and the buyer may feel he or she is paying twice for certain services. Instead, if the buyer’s attorney closes the loan as well, all preparation is consolidated into one effort, thereby reducing any duplication of effort and thus reducing the total legal fees in the transaction.

Most, but not all, lenders will honor a buyer’s request to have their personal attorney close the loan, so long as that attorney is qualified, but remember that this request must be made early in the process before the lender assigns the transaction elsewhere. If you are buying residential real estate financed by a mortgage loan, and your attorney is experienced in the representation of mortgage lenders, I encourage you to consider asking your lender at the time of application to use your own attorney to close the mortgage loan as well. The odds are you will be quite satisfied with the outcome.

First Time Homebuyer Tax Credit Extended

2009-11-05T09:01:00.000-08:00

Good news for first-time homebuyers! The United States Senate has voted to extend and expand the first-time homebuyer tax credits which have been in place as part of the economic stimulus package enacted earlier this year; the House is expected to follow suit later this week. The program was scheduled to expire at the end of November, but will now be extended through June 30, 2010. Under the new bill, Buyers who have owned their current homes at least five years will be eligible for tax credits of up to $6,500. First-time homebuyers, or anyone who hasn't owned a home in the last three years, will still get up to $8,000. To qualify, buyers have to sign a purchase and sale agreement by April 30, 2010, and close by June 30. The credit is available for the purchase of principal homes costing $800,000 or less; vacation and second homes are not eligible. There are income caps: the credit is phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

If you are considering the purchase of your first home, this is the time to do it! Lower prices and the tax credit make this a most favorable time to become a homeowner.

S Corp or LLC?

2009-10-09T09:49:00.000-07:00

I was recently asked to explain the difference between a Massachusetts Subchapter S corporation (S Corp) and a Limited Liability Company (LLC). As I was pondering the response, it occurred to me that this would make a great topic for a blog entry!

Both an S Corp and an LLC provide limited liability protection of personal assets against lawsuits and other liabilities of the business. Both also offer the benefit of the "pass-through" of profits and losses to the individual tax return of the shareholder/member, thereby eliminating the double taxation which occurs for standard business ("C") corporations. Other comparisons of the two highlight the differences.

1. Formalities of creation: Both are created by the filing of an organizational document with the Massachusetts secretary of state. The filing fee for a corporation is $275 (for up to 275,000 shares) and the filing fee for the LLC is $500. An S Corp also requires the additional step of filing a Subchapter S election with the IRS once the corporation is formed. Both must file an annual report each year with the Secretary of State. The annual report filing fee for a corporation is $125 per year and the filing fee for the LLC is $500 per year.

2. Formalities of Operation: An S Corp is governed by the corporations statute, which requires the creation of bylaws, the maintenance of formal minutes and other records, and the holding of annual meetings. The LLC has no such formal requirements, though the creation of an Operating Agreement is highly recommended.

3. Composition of Participants: An S Corp may have no more than 75 shareholders, all of whom must be U.S. citizens or have residency status. All shareholders must be individuals. Only one class of stock is permitted. The corporation is controlled by officers and a board of directors. In contrast, members of an LLC may be individuals or separate legal entities, U.S. citizens or not. There are no limits on the number of members permitted, and there may be different classes of members. An LLC may be run by the members or by managers who may not be members.

4. Allocation of Profits and Losses: With an S Corp, the allocation of profits and losses must be according to the ratio of each shareholder’s percentage of stock ownership, even if a different distribution scheme is preferred. With an LLC, profits and losses may be allocated to members in whatever manner the members wish regardless of their percentage of ownership. This, for example, would allow a member who contributes less capital but more "sweat equity" to receive a higher portion of profits despite a lower capital contribution.

5. Self-employment taxes: With an S Corp, income paid to shareholders as distributions is not subject to self-employment taxes; instead only the salary paid to an owner/employee is subject to self-employment tax. With an LLC, members are considered to be "self-employed" and, as such, must pay self-employment tax on all income received from the LLC. If the business operates in active trade, the members are active in running the business, and self-employment taxes on the members would be high, an S Corp may be preferred; the business can elect to pay a lower salary and more in distributions to minimize this tax. The downside of the S Corp in this context is that payroll taxes must be paid, and the paperwork associated therewith can be substantial.

So which is right for you? If your priorities are operational ease, flexibility with membership and allocations of profit and loss, and low maintenance, then an LLC might be your preferred entity. If you are looking to save on employment taxes and annual filing fees, and you don’t mind the structural limitations, then an S Corp may be right for you. In any situation, it is crucial to seek the advice of a competent attorney and accountant in order to make a fully informed choice.

Good news for the local housing market?

2009-09-30T05:10:00.001-07:00

The Boston Globe reports today that Massachusetts home sales have continued to increase for the second consecutive month, indicating (in its view) that the housing market is beginning to recover. Do we believe this? Perhaps the power of the press can make it so! Read the complete article at http://www.boston.com/business/articles/2009/09/30/signs_point_to_recovery_in_mass_housing/

More new federal lending regulations

2009-09-27T07:23:00.000-07:00

The federal government has been staying busy in its efforts to revamp the mortgage lending industry. In addition to the new regulations previously reported here, an article in today's New York Times explains additional limitations on lenders making high-cost mortgage loans to borrowers who cannot demonstrate a clear ability to repay the loan in the conventional manner. Borrowers with low credit scores or no ability to fully document their income will find it far more difficult to obtain mortgage financing. The full article may be found at http://www.nytimes.com/2009/09/27/realestate/27mort.html?emc=tnt&tntemail1=y.

Significant Changes to Mortgage Lending Disclosure Rules and Their Impact on Your Closing

2009-09-15T11:16:00.000-07:00

The Mortgage Disclosure Improvement Act, which affects all residential mortgage loan applications submitted on or after July 30, 2009, imposes substantial additional compliance obligations on the part of mortgage lenders, in an effort to provide more transparency and fairness and to better protect consumers in making choices about mortgage financing. These new regulations are likely to lengthen the time it takes to close a mortgage loan. It is important that all parties involved in a real estate mortgage transaction understand these new regulations and consider their impact on the timing of the process. Following is a summary of the changes and how they may impact you:

1. A lender is now required to provide a good faith estimate of closing costs (GFE) and an initial Truth In Lending Disclosure Statement (TIL) within three business days after receiving a mortgage loan application. The lender may not collect any up-front fees from a borrower, except for a credit report fee, until the initial GFE and TIL are received by the Borrower.

2. No mortgage loan may close less than seven business days after the date on which the borrower is issued the initial GFE and TIL.

3. A home buyer must be provided with a copy of the appraisal not less than three business days prior to closing.

4. If the Final Truth-In-Lending Disclosure form (TIL) indicates an increase of .125% or more in the Annual Percentage Rate from the APR stated in the initial TIL, there is a mandatory 3 day waiting period before the loan can close in order to give the borrower an opportunity to review and agree to the new numbers.

These new regulations have the potential impact of delaying the timing of closing a mortgage loan. The ordering of appraisals may be delayed until the lender is able to collect the appraisal or application fee. A delayed appraisal may result in a longer time between application and when the lender issues a commitment letter and clears a loan to close. All of this means that the closing date set in a purchase and sale agreement between a buyer and seller may no longer be certain, since it is possible that the lender will be required to delay the closing in order to meet these new disclosure and timing requirements. In certain circumstances, these waiting periods may be waived by the borrower if it is determined to be "necessary to meet a bona fide personal financial emergency". It remains to be seen what constitutes "a bona fide personal financial emergency" and whether individual mortgage lenders will permit waivers as a matter of policy.

As a buyer, realtor or buyer’s attorney, you would be well advised to include a clause in your purchase and sale agreement which grants an extension of the stated closing date if required by the mortgage lender in order to satisfy these new regulations. Without that, a buyer might be caught in that no-man’s land between having a contractual obligation to close on a stated date or forfeit a deposit, but not yet having mortgage funds available from the lender. Query whether such a circumstance will qualify as a "bona fide personal financial emergency" which permits a waiver of the notice periods.

New Rules For First Time Home Buyers

2009-09-15T10:51:00.001-07:00

When I started this blog, I was told that the first rule of blogging is to keep up with posting so readers stay interested. Somehow, that advice fell to my deaf ears over the summer. I won't try to make any unusual excuses, but instead will just renew my efforts to go back to regular postings, so that my loyal readers will again be kept informed of interesting developments in areas of the law that might affect them.

I will start by encouraging all potential first-time homebuyers to read Ron Lieber's terrific article in the September 11, 2009 issue of the New York Times, "Seven New Rules for the First -Time Home Buyer". Mr. Lieber has excellent advice on this topic in our current economic climate. Check it out at http://www.nytimes.com/2009/09/12/your-money/mortgages/12money.html?_r=1&emc=eta1.

More Trouble In Mortgage Land

2009-06-10T19:07:00.000-07:00

The Boston Globe reports today what I have been seeing to be true: property appraisals are coming back at very conservative (read: low) values, and this is having a chilling impact on both sales and refinances of residential properties. A low appraisal may have the impact of reducing the dollar amount the mortgage company will permit you to borrow. Moral: whereas it used to be enough protection for a buyer to include a general mortgage contingency in an Offer to Purchase, these days it is prudent to include a specific additional contingency that the appraisal performed by the bank must indicate a value in at least the amount of the proposed purchase price.

The full text of the Globe article can be found here: http://www.boston.com/business/articles/2009/06/10/appraisal_discrepancies_put_some_home_sales_at_risk/

Rising Transfer Taxes in Barnstable County

2009-06-10T08:19:00.000-07:00

Heads up, all of you Cape Cod homeowners. If you sell your Cape home, effective July 1, 2009 you will pay more tax for the privilege of doing so.

Throughout Massachusetts (except in Barnstable County), sellers of property pay a state excise tax (called "deed stamps") upon sale in the amount of $4.56 per thousand of stated consideration in the deed. Barnstable County has long assessed an additional county excise tax for any property sold within Barnstable County, with sellers paying a combined state and county excise tax of $5.70 per thousand. It has just been announced that the Barnstable County deeds excise tax will increase so that as of July 1, 2009, any sale of property in Barnstable County will cost a seller a combined excise tax of $6.12 per thousand of sale price. Seller beware!

More In The Scam World

2009-06-10T08:15:00.000-07:00

Continuing on the theme of the last post, it seems that regulatory bodies are starting to crack down on the companies taking advantage of homeowners in trouble. The New York Times reports today that Andrew Cuomo, state attorney general, is going after loan modification companies who are charging high up-front fees and delivering no results. Good work, Mr. Cuomo! Here is the link to the article: http//www.nytimes.com/2009/06/10/business/10loan.html?emc=tnt&tntemail1=y

... And The Scams Just Keep On Coming

2009-05-29T19:38:00.000-07:00

For some unscrupulous types, troubled times represent an opportunity to take advantage of people when they are at their lowest. In today's Boston Globe, reporter Eileen AJ Connelly reports on yet another type of scam that is being perpetrated against homeowners in financial trouble. This new industry of "foreclosure rescue companies" purports to offer troubled mortgagors assistance in working out loan modifications. They disseminate written materials which look like official IRS or governmental communications but in fact are not. These companies prey on unsophisticated homeowners who may be grasping at any way to keep from losing their homes. The full article can be found here:
http://www.boston.com/business/personalfinance/articles/2009/05/29/if_youre_in_trouble_with_your_mortgage_beware_of_those_who_offer_to_help/

Once again, let the buyer beware. Don't be fooled!

Thinking of Buying a Condo?

2009-05-24T14:24:00.000-07:00

Secondary mortgage market lenders have implemented a new and stricter set of lending guidelines which may make it more difficult for some buyers to purchase a condominium. Some of the new regulations include:

1. At least 70 percent of units in a new complex must be sold or under contract for purchase as a principal residence or second home.

2. No more than 15 percent of units in a complex may be 30 days or more past due on condo fees.

3. Insurance requirements have been made stricter.

4. Buyers must make a down payment of at least 25 percent to avoid a higher fee or interest rate.

Read the full report in the May 23, 2009 issue of the Boston Globe at http://http://www.boston.com/business/personalfinance/articles/2009/05/23/new_rules_on_condo_loans_hindering_some_buyers/.

New York Times: Lenders More Open To Short Sales

2009-05-18T14:32:00.000-07:00

When the value of a home is less than the amount of outstanding debt secured by the home, the homeowner is in an untenable predicament. In this circumstance, if the property is to be sold, the owner must either bring funds to the closing table to pay off the debt, or negotiate a "short sale" with the lender (see my blog post dated January 6, 2009). If neither option is available, the homeowner may face foreclosure. Lenders, particularly home equity lenders in second position, have been reluctant to agree to short sales, but the New York Times now reports that this method for escaping foreclosure may be getting a little easier to navigate. Whereas to this point second lien holders often resisted agreeing to short sales, mortgage lenders say they are now working more cooperatively on short sales, and proposed changes in the industry could increase the number of these transactions. To read this New York Times report, click here: http://www.nytimes.com/2009/05/17/realestate/17mort.html?emc=tnt&tntemail1=y.

Estate Planning for Blended Families

2009-05-07T05:53:00.000-07:00

Estate planning in the best of circumstances can be a challenging process, but it can become even more complicated when dealing with the issue of blended families. In a time when divorce and remarriage are common, many families include children from previous marriages, and the decisions as to who will inherit what may be complicated by the complex relationships among parents, step-parents, step- and half-siblings and other family members.

It may be only natural to want to pass on your assets to your biological children, but you may also want to provide for your subsequent spouse and even stepchildren. Balancing these sometimes disparate considerations can be a complicated and challenging experience. Even when blended families get along, the potential for acrimony, disagreement and even litigation among the different family segments exists.

At a minimum, each spouse of a subsequent marriage should have a will. In the absence of a will, as a result of the laws of intestate distribution, assets are likely to pass in ways which are inconsistent with your intentions. Yet a better approach is also to establish a trust, which will permit you to provide for the surviving spouse and still protect a portion of your assets for your children of a prior marriage.

Issues to be considered when planning for a blended family may include the following:

1. Are your beneficiary designations up to date? Have you successfully removed your ex-spouse from receiving any of your assets? In certain cases a beneficiary designation may trump a divorce decree or the terms of a will. Be sure that you have removed your former spouse as beneficiary in all cases and designated beneficiaries consistent with your current wishes.

2. Determine what you wish to leave to your new spouse and stepchildren, and what you wish to leave to your children, whether of the current marriage or a prior marriage. Consider the needs of all parties and strive to ensure that the assets are distributed in a way that reflects your goals. Establishing a trust can eliminate the possibility that the subsequent spouse will have the authority to change beneficiaries and disinherit children from a prior marriage after your death.

3. Consider establishing a prenuptial or postnuptial agreement which sets out the distribution of finances and properties upon your death.

4. Consider the purchase of life insurance as an effective way to provide a known amount to children from a previous marriage.

The most important thing you can do when planning for a blended family is be honest and open. Communicate your priorities and your wishes, and speak frankly but openly with your spouse, children and step-children so that all understand your intentions in making the decisions that underlie the estate plan. Such communication is crucial to avoiding ill will and resentment among survivors after your death.

More Thoughts on the Estate Tax Laws

2009-04-28T17:14:00.000-07:00

The New York Times has published several interesting articles on the current state of the estate tax laws, the probable extension of the current tax rate and exemption amount, and the impact of these matters on your estate plan. For some informative reading, see the following articles:

"Study Estate Plan Before Laws Shift", February 25, 2009
http://www.nytimes.com/2009/02/26/your-money/estate-planning/26estate.html?scp=1&sq=Laws%20Shift&st=cse

"Smaller Though It May Be, It’s Time to Look at the Estate", March 20, 2009
http://www.nytimes.com/2009/03/21/your-money/estate-planning/21wealth.html?scp=6&sq=&st=nyt

Declarations of Homestead

2009-04-25T14:36:00.000-07:00

If you are a homeowner in Massachusetts, you are entitled to the protections afforded by a Declaration of Homestead. A Declaration of Homestead is filed at the Registry of Deeds in the county where the property is located, and allows homeowners to protect up to five hundred thousand dollars ($500,000) of the value of their primary residence, per family, against any attachment, levy, execution or sale to satisfy debts arising subsequent to the date of the Homestead filing. Any owner occupying a home as a principal residence may file for the Homestead protection. Presently, only one owner may file a Homestead, though if you are married and own the property with your spouse as tenants by the entirety, both spouses and family members receive the benefit of the Homestead protection.

Certain claims are exempt from the Homestead Law. Matters against which a Homestead will not protect include (a) federal, state and local taxes and other liens; (b) mortgages used to purchase the home; (c) orders for payment of spousal or child support; (d) judgments based upon fraud, mistake, duress, undue influence or lack of capacity; and (e) debts contracted prior to the acquisition of the Homestead.

Under the current Homestead law, there are certain questions whose answers are not clear. May a person who owns a home in Trust file a homestead? If a homeowner refinances a first mortgage, is the Homestead terminated? Why is the Homestead available to only one homeowner?

A bill is currently pending in the Massachusetts legislature which would provide the answers to these questions. If the pending bill is passed, it will automatically protect up to $125,000 of equity protection to all homeowners, whether or not a Declaration of Homestead is filed. A filing will continue to protect up to $500,000 in home equity. The Bill will also allow both spouses to file, even if only one spouse is on the title to the house. The Bill would specifically permit filings on homes owned in Trust and protect beneficiaries of trusts which hold title to their principal residence. Finally, the Bill would prohibit mortgage lenders from requiring the release of a homestead in order to secure a refinancing mortgage and will verify that any language in a mortgage purporting to terminate a Homestead will be construed not as a termination of Homestead rights, but as a subordination of those rights to the lender. Stay tuned for the outcome of the vote on this bill.

A Declaration of Homestead is an easy way to protect the equity in your home, but it must be filed for you to have the protections. If you are unsure whether you have a Declaration of Homestead on file, it is simple both to verify and to file as needed.

It's An Honor To Be Recognized

2009-04-01T11:58:00.000-07:00

I am so honored and proud to share the news that I have been recognized by the Boston Women's Business Journal as one of "The Top Ten Lawyers" in their April, 2009 issue. The selections are made based on nominations submitted by clients and colleagues. I am grateful to Susan Liberman of Karp, Liberman & Kern Sotheby's International Realty for submitting a nomination on my behalf. While my true professional satisfaction comes from the relationships I have with my clients and the ways in which I am able to provide assistance, it's certainly wonderful to be recognized for the quality of my skills and services. If you are interested in seeing the complete "Top 10" list, click here http://http//www.bostonherald.com/business/womens/general/view/2009_04_01_Women_s_Business_Top_10_Lawyers/

Hopeful Signs For the Real Estate Market

2009-03-25T19:14:00.000-07:00

Today's Boston Globe reports an uptick in the number of residential properties going under agreement in the last week. Interest rates are at historical lows, and it seems that previously cautious buyers are beginning to take action. Sellers are encouraged by the news and the number of properties going on the market is on the increase. This is good news for all of us in the real estate industry. Read the entire article here: http://www.boston.com/business/articles/2009/03/25/real_estate_listings_on_rise_some_feel_a_thaw/

So You Want To Buy A House?

2009-03-17T11:52:00.000-07:00

Whether you are a first-time or repeat buyer, the process of purchasing real estate can be daunting. Following is a basic step-by-step primer of the components of closing on your new home.

When you are ready to begin looking seriously for a property to buy, it will be to your advantage to have a pre-approval letter in hand from a mortgage lender which verifies the purchase price you can afford and the amount of mortgage for which you will qualify. A pre-approval letter will make your offer more attractive to a seller since it affirms your ability to consummate the purchase. You may obtain a pre-approval letter from any mortgage lender, and while you are not then obligated to use that lender for your actual purchase, if you establish a relationship with a lender at an early stage, the loan officer can be an additional resource for you throughout the process.

Pre-approval letter in hand, you find the house of your dreams and you want to submit an Offer. Many buyers feel that this is the time to engage the services of a qualified real estate attorney; others work with the realtor and wait to hire the attorney until the Offer is accepted. The realtor or attorney will assist you in preparing an Offer, most likely on the standard "Offer to Purchase Form" customarily in use. The Offer will contain the business terms, such as price, amount of deposit, and dates, should include a contingency for satisfactory home inspection, and may also include contingencies for mortgage financing and other matters. The assistance of an experienced realtor or attorney is indispensable in preparing an Offer which contains all of the appropriate protections for a buyer. Negotiations may ensue until the parties come to agreement on the final terms and execute the Offer document.

In Massachusetts, unlike in some other states, the Offer to Purchase is a preliminary document which is later superceded by a more comprehensive Purchase and Sale Agreement. Do not, however, be fooled into thinking the Offer is not a binding contract; courts have enforced executed Offers to Purchase even in cases where the parties failed subsequently to enter into a Purchase and Sale Agreement. Most Offers contemplate a period of one to three weeks to finalize and sign the P&S. If you have not already hired an attorney, now is the time to do so. In the period between Offer and P&S, you should have the property fully inspected by a qualified home inspector. The inspector will give you a written report and flag any items of concern; you may then elect to negotiate price adjustments or repairs with your seller as a condition of closing. If you are not satisfied with the results of the inspection or cannot reach resolution with the seller, under the inspection contingency you have the right to terminate the Offer and recover any deposits paid to that point. It is important that you address any and all concerns regarding property condition during this time, and that any terms you negotiate with the seller be incorporated into the P&S. With certain exceptions, once you sign the P&S, you are essentially agreeing to accept the condition of the property "as is" and may not thereafter raise issues relating to property condition except to the extent that it represents a change since the date of the Purchase and Sale Agreement.

So you now have an executed Purchase and Sale Agreement – congratulations! If you have not already settled on a choice of mortgage lender, you should do that without further delay and submit a complete mortgage application by any applicable deadline in your mortgage contingency, if any. At the time of application, your lender should give you a Good Faith Estimate of Settlement Charges, setting out the closing costs you will expect to pay. That document, and the Truth In Lending Disclosure Statement, allow you to compare loan products among various lenders. Your lender will process your application and issue a Loan Commitment Letter. If you have a mortgage contingency deadline in your P&S, be sure you receive your written Loan Commitment Letter before that deadline expires.

In Massachusetts, closings are conducted by attorneys rather than by title or escrow companies. The attorney who represents the lender and acts as settlement agent may be your attorney, or it may be a different attorney selected by the lender. It is quite common that one attorney represents both the buyer and the lender, and although this does technically constitute a possible conflict of interest, this conflict is regularly waived by the parties because the interests of the buyer and lender are very much the same. For a buyer, I believe there are two advantages to having your attorney handle the entire transaction. The first is for peace of mind—you no doubt have shopped carefully for a qualified and recommended attorney to represent you, so it only makes sense to have that attorney handle the important roles of examining title, preparing documents, and acting as settlement agent. If the lender chooses another attorney for those responsibilities, you have no input on quality control. The second advantage is lower cost. One of the closing costs customarily paid by a borrower (unless you get a "no-closing-cost" loan) is the attorney’s fee for the lender’s attorney. If two attorneys are involved, there is a certain amount of overlap which is likely to result in some duplication of fees paid. If your attorney also represents the lender, you eliminate that duplication of effort, which results in a lower total legal fee. In selecting a lender, it is always worth requesting, or even requiring, that your attorney also be permitted to represent the lender and serve as settlement agent.

Once your loan application is submitted, you can take a bit of a breather, as most of the work from then on belongs to the attorneys. The one exception is that you must procure homeowners insurance coverage to take effect as of the closing date. You will be required to pay the premium for the first year in full, and to provide the lender prior to closing with an insurance binder evidencing the coverage and naming the lender as an additional insured.

Prior to closing, the attorney will arrange for a title professional to search and examine the public records for information related to the property's title. The attorney will notify the seller of any defects in title, and those must be dealt with before the property can change hands. Closing will not occur until title to the property is clear. The one exception is that outstanding current mortgages taken out by the seller from institutional lenders may be paid off out of sale proceeds with the Mortgage Discharge to be recorded after the closing. It is the attorney’s responsibility to attend to this and follow up to record the proper Discharges.

Finally the day of closing will approach. The settlement agent will prepare the HUD-1 Settlement Statement. The "HUD", as it is known, outlines all of the costs for both the buyer and seller associated with the closing. Your costs will include those items shown on the original Good Faith Estimate (with possible modifications), as well as costs originating out of the attorney’s office. You will be offered the option to purchase an Owner’s Policy of Title Insurance, which I do recommend (see previous blog entry on this topic). You will be provided with a copy of the HUD in advance of closing and asked to obtain one bank check for the total amount due. It will not be necessary to bring multiple checks to closing; instead, it is the job of the settlement agent to divide your funds and disburse them in accordance with the HUD.

On closing day, all parties will meet at the office of the lender’s attorney or at the applicable registry of deeds. You will sign a seemingly endless number of documents that will be explained by your settlement agent, including, most importantly, a Promissory Note, which is your promise to the lender to repay the funds being advanced, with interest, and a Mortgage, which puts a lien on the property to secure your obligations under the Promissory Note. The seller will deliver a Deed which transfers title to your name. Following signing of all documents, the attorney will arrange for the recording of the Deed and the Mortgage at the applicable registry of deeds. The recording of the documents is the final step in the process and represents the moment when everything is completed. Upon recording, you become the new owner of both a house and the debt that you incurred to purchase it. Welcome to the American Dream!

The State of Federal Estate Taxes

2009-03-02T05:55:00.000-08:00

The next couple of years should be very interesting with respect to federal estate tax laws. Revisions to the federal estate tax law in 2004 increased the exemption amount (the maximum amount a decedent may leave without incurring any estate tax) on an incremental basis which culminates in a complete elimination of any federal estate tax for people who die in the year 2010. This means that regardless of the size of your estate, if you die in 2010 you will pay NO federal estate tax. The tricky thing is, however, than in 2011, the estate tax returns, and the exemption amount, currently at $3.5 million in 2009, will revert back to $1 million. For the last five years, estate planners have wondered what, if anything, congress will do about the quirks of this law. Given the state of the economy and the other issues facing congress, it may well be that nothing is done in the near term.

The law as it stands has a funny potential impact. When it was enacted in 2004, some nicknamed it the “Throw Mama From The Train” law, joking that children of wealthy older people would be motivated to “eliminate” their parents in 2010 in order to receive the maximum inheritance without tax. Conversely, according to an article in The Boston Globe on March 1, 2009, Jeffrey Frankel, who served on the Council of Economic Advisors under President Clinton , has pointed out that potential heirs of ailing wealthy parents may take whatever measures are necessary to keep their parents alive beyond December 31, 2009 in order to reap the benefits of the tax law repeal. He posits that intensive care units in hospitals will see a big spike in business as these children strive to keep their parents alive and breathing until 2010 arrives.

One has to wonder whether congress contemplated these odd, non-legal quirks of the 2004 revisions at the time they were enacted. It will be interesting to see if they take the time to straighten things out before the end of this year.

The best laid plans

2009-03-02T05:52:00.000-08:00

To my loyal readers... a sincere apology for my silence over the last few weeks. A family crisis sidetracked my attention for this period of time, but I am back and will continue to post on current legal matters of interest.

Thanks for your patience during my hiatus.

Judy

Have You Refinanced Yet?

2009-01-16T05:06:00.000-08:00

They say home mortgage interest rates can't go any lower, and yet they keep going lower. This week, rates for a no-point 30 year fixed mortgage were below five percent. This is incredible! Refinancing at these rates is an opportunity to substantially reduce your monthly payment, convert from an adjustable rate to a comparable fixed rate, consolidate first mortgage and home equity debt into one loan, or tap on the equity in your home for additional cash. So what are you waiting for? If you are looking for a recommendation to a reputable mortgage lender with excellent rates and products, give me a call.

1031 (Tax-Free) Exchanges

2009-01-16T04:59:00.000-08:00

If you are considering the sale of a highly appreciated investment property and intend to reinvest the proceeds in another investment property, a 1031 Exchange (Tax-Deferred Exchange) is a powerful tool for tax deferral.

A 1031 Exchange allows the taxpayer to sell income, investment or business property and replace it with like-kind replacement property without having to pay federal income taxes on the transaction. Taxes on the sale of the first property will be deferred, and the tax basis of the replacement property will be essentially the purchase price of the replacement property minus the gain which was deferred on the sale of the relinquished property as a result of the exchange. The gain on the sale of the relinquished property will be deferred until the taxpayer cashes out of his investment in the future.

In order to qualify for a 1031 Exchange, certain rules must be followed. The rules are, of course, complicated and must be carefully adhered to, but here is a brief summary of these rules:

1. The property being sold must be “Qualifying Property”, meaning property held for investment purposes or income-producing purposes. A primary residence cannot be used for a 1031 Exchange.

2. The replacement property must be “like-kind”, which in the case of real estate means another piece of real estate. Title must be taken in the same names as the relinquished property was titled.

3. Ideally, the replacement property should be of equal or greater value than the relinquished property. To the extent the replacement property has a lower value than the relinquished property, taxes will be owed.

4. In most cases, the services of a “qualified intermediary” are engaged. A qualified intermediary is a person who is not the taxpayer who enters into a written “exchange agreement” with the taxpayer and acquires the relinquished property from the taxpayer, transfers the relinquished property, acquires the replacement property, and transfers the replacement property to the taxpayer. The qualified intermediary does not actually receive and transfer title, but facilitates the transactions in compliance with IRS regulations.

5. The exchange must be done within a particular time frame. It may be simultaneous, or the replacement property may be acquired before or after the sale of the relinquished property so long as IRS requirements are met.

6. If the relinquished property is sold first, a replacement property must be identified within 45 days from the date of the sold property, and closing must occur within 180 days from the date of sale. The intermediary will hold the proceeds of the sale until the subsequent closing occurs.

7. If the replacement property is acquired before the sale of the relinquished property, the property to be relinquished must be identified within 45 days after the acquisition, and sold within 180 days of the acquisition. The intermediary will hold the replacement property until the relinquished property is sold.

Of course, as with any transaction involving complicated tax regulations, the advice of a qualified professional should be sought. If you are selling an investment property and want to defer any taxes which would be due on the sale, consider a 1031 Exchange as an alternative.

The Power of Networking

2009-01-09T15:51:00.000-08:00

For a small business owner, the importance and power of networking cannot be overstated. Networking is an effective and inexpensive way of connecting with people who could become your clients, support systems and referral network.

So what exactly is “networking”? It’s actually pretty simple—it involves talking with others about what you do, and listening to them in return to find out how you can help them. Most people you meet could be a potential client or a valuable contact. Learn to make small talk. Practice being able to articulate what you do in clear, easily understandable, memorable and concise way. Tell people about yourself, and don’t be shy about telling them how they can help you grow your business. In return, be a good listener, and ask how you can help them in the same way.

I have been incredibly fortunate for the last fifteen years to be part of one of the greatest networking groups in our area—the Women's Business Network of the Wellesley Chamber of Commerce (“WBN”). I joined WBN when I first started my suburban solo practice in 1993, worked on committees, chaired the group for three years, and have remained an active member to this day. There has been no better source of direct business, referral business and resources for my needs than WBN. I have made fabulous business connections and incredible friendships, and I can honestly say that WBN has been one of the best and most consistent sources of opportunity for me over the past fifteen years. The group continues to thrive and attract new members, but of course we always hope for more. Thanks to the efforts and talent of Deb Beck at Studio 18 Group (http://www.studio18group.com), WBN has produced a wonderful marketing piece profiling several of the active members. I am honored to say I was chosen as one of them, and I proudly share that piece with you here.

If you are a business person and are not doing any networking, now is the time to start. If you are a woman in business in the Metro West area, check out WBN by contacting the Wellesley Chamber of Commerce (http://www.wellesleychamber.org) —you can’t go wrong.

Short Sales

2009-01-06T12:40:00.000-08:00

In today’s economy, it is not so uncommon that a homeowner may have more mortgage debt on his property than the property is worth. If the homeowner is unable to afford the payments and is forced to sell the property, he must negotiate a "short sale" with the mortgage lender. In a "short sale", the lender agrees to accept net proceeds of a sale which are lower than the outstanding loan obligation, and forgive the rest of what is owed on the mortgage. By accepting a short sale, the lender avoids a lengthy and costly foreclosure proceeding, and the homeowner is able to pay off the loan for less than what he owes.

Lenders’ policies differ with respect to accepting "short sales". If you are in a situation where a "short sale" might be an option, before you put your property on the market, you should contact your lender to explore whether they will consider accepting a proposal for a "short sale".

Generally, in order for a lender to agree to a "short sale", the following must pertain:
1. The homeowner must be in or near default under the mortgage.
2. The lender will do an appraisal of the property to verify that the value of the property has fallen below the outstanding loan balance.
3. The lender will request financial information from the owner to support his argument that he cannot afford the payments and does not have sufficient assets to pay off the loan in full. The homeowner must prove that a serious hardship exists, such as loss of employment, illness, death divorce or bankruptcy.
4. If the lender approves the "short sale" based on the appraisal and the homeowner’s financial documentation, the property should be marketed for sale subject to approval of the mortgage lender. The lender must review and approve the terms of the sale and the purchase contract as a condition of closing.
5. As a further condition of approval, the lender will also require the submission of a proposed closing settlement statement. This statement should set out the closing costs to be paid out of sale proceeds and the projected net proceeds which the lender will receive.

"Short sales" are not for the faint of heart. The process can be fraught with peril, beginning with the challenge of even identifying the correct person in the correct department of the lender's operation to whom to submit a request. The paperwork can be substantial, and the lender is likely to move only at its own pace regardless of the time frame to which buyer and seller may have agreed. Nevertheless, for a homeowner in a substantial hardship situation who cannot afford the payments and does not have assets to pay off the loan in full, a "short sale" can be the way out of a very difficult situation.

Good News for Buyers

2008-12-30T10:38:00.000-08:00

Not such good news for sellers, but CNN reports a record 18% drop in home prices over the last year: http://money.cnn.com/2008/12/30/real_estate/October_Case_Shiller/?postversion=2008123009. Prices are down, interest rates are at their lowest level in 37 years... what better market conditions could exist for a potential buyer? If you have been thinking about a new home purchase, this is a great time for you, especially if you don't have a property to sell. So go ahead, do your part to give our ailing economy a shot in the arm. It's patriotic!

One Story that Explains The Mortgage Crisis

2008-12-30T10:32:00.000-08:00

Thanks to my assistant, Lynna Henderson, for pointing me to the attached article in the International Herald Tribune recounting the activities of Washington Mutual over a several year period. Amazing stuff! http://www.iht.com/articles/2008/12/28/business/wamu.php?page=1

More on the refinance craze...

2008-12-24T14:25:00.000-08:00

CNN reports a frenzy of refinancings! Should you join in? Read this special report at CNNMoney.com: http://money.cnn.com/2008/12/24/real_estate/when_to_refi/?postversion=2008122414.

Estate Planning for Pets

2008-12-24T12:33:00.001-08:00

It might sound crazy to some, but more and more people are including provisions for their pets in their estate plans. While it is certainly possible to make informal arrangements with a loved one to adopt your pets in the event of your demise, many are opting to formalize those arrangements in written legal documents. Pets play a very significant role in the lives of many individuals, so it only makes sense that they would want to be sure that their pets are properly cared for after their death. Being the owner of two dogs, two cats, two hamsters and a Russian tortoise (who will no doubt outlive not only me but my teenage daughter, its owner, as well), I certainly understand the importance of pets to a person and a family. So how do we ensure the proper care of your beloved animals after you are gone?

Legally, a pet is considered tangible personal property which will pass according to your Will. An important consideration is the selection and designation in your Will of an appropriate beneficiary/caretaker for your pet. It is also wise to name at least one alternate caretaker in the event that your first choice is unable to serve for the duration of the pet’s life.

You may also wish to provide a source of funds to the caretaker to cover the costs of your pet’s care. In estimating the correct amount, you should consider your own annual costs for food, veterinary care, grooming, supplies, boarding and the like, in relation to the pet’s probable life expectancy. You might choose to make a conditional or unconditional outright gift of that amount to your pet’s caretaker, or you might prefer to protect those funds by the establishment of a trust for that purpose. Leona Helmsley aside, while some states do permit the pet itself to be named as beneficiary of such a trust, in Massachusetts the beneficiary of such trust must be a human. The actual structure and terms of the trust, and the named trustee and beneficiary, would be determined based on a variety of factors to be considered as part of discussing your overall estate plan.

Short of your death, another concern is your pet’s fate if you become incapacitated. The inclusion of provisions for your pet’s care in a comprehensive Durable Power of Attorney would address that circumstance and ensure that your pet will be properly looked after if you are unable to care for your pet yourself.

If you are a pet owner and already have estate planning documents which do not address these issues, it may be time for an update. If you have not yet gotten around to putting your estate plan into place, the resolution to do so is a great way to begin the new year, whether or not you are a pet owner.

Wishing all a jolly Christmas/Hanukkah/Kwaanza/Festivus/General Relaxation Day!

Yes, Virginia, it IS time to refinance

2008-12-19T05:07:00.000-08:00

In the wake of the Federal Reserve's latest interest rate cut this week, home mortgage interest rates are at their lowest level in at least 37 years. Now most certainly is the time to refinance your adjustable rate mortgage into a thirty-year fixed rate product, or to refinance to reduce your current fixed rate and lower your monthly payments. Read more about this in today's Washington Post, http://www.washingtonpost.com/wp-dyn/content/article/2008/12/18/AR2008121803532.html. So delay no more! You will reap the benefit and stimulate the economy at the same time.

Reverse Mortgages

2008-12-13T05:40:00.000-08:00

Reverse Mortgages are available to seniors as a way of supplementing income and providing additional cash flow for living expenses. A reverse mortgage allows a senior homeowner to access the equity in her home as cash without an immediate repayment requirement. Instead of the homeowner making the mortgage payments, the lender pays the homeowner, and no payments are required until the homeowner no longer uses the home as her principal residence. The homeowner can choose to receive the mortgage proceeds as a lump sum, in monthly or quarterly payments, or even as a line-of-credit.

To be eligible for a reverse mortgage, a borrower must be at least 62 years old, own and live in the home, and have little or no existing debt on the property. Loan amounts and interest rates available depend on the value of the home and the age of the borrower. The older the borrower, and the more valuable the home, the more that may typically be borrowed.

Unlike a traditional second mortgage or home equity line of credit, with a reverse mortgage there is no requirement that the borrower have a certain income to debt ratio to qualify, and there are no monthly payments.

Even if the borrower lives longer than the term of the mortgage, she will not need to repay the loan as long as any borrower continues to live in the house and keeps the taxes and insurance current. And at the time repayment is due, if the house is worth less than the total amount due, the repayment is limited to a maximum of the value of the home.

The U.S. Department of Housing and Urban Development (HUD), which insures reverse mortages, recently adopted new rules increasing the loan limit to $417,000 for federally-insured reverse mortgages and establishing caps on the amount of fees lenders can charge. HUD also implemented the new “For Purchase” program, which allows seniors, age 62 or older, to purchase a new principal residence using loan proceeds from a reverse mortgage. This program will allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction by eliminating the need for a second closing. The program will also enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs.

Reverse mortgages have long been a financial planning tool for older homeowners, and they are increasing in popularity. They are not for everyone, but for the right homeowner, they can provide the security of cash flow during retirement years.

For more information about Reverse Mortgages, visit HUD’s website at http://www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm.

Estate Planning For Parents of Minor Children: "But We Just Can't Decide on Guardians!"

2008-12-09T05:02:00.000-08:00

As parents of minor children, it is absolutely essential that you have an orderly estate plan in place. This at a minimum means executing a will, which is a legal document that sets forth your wishes regarding disposition of your assets upon death, designates those individuals who will be responsible for the orderly administration and distribution of your estate, and designates the guardians of your minor children. Also strongly advised is the creation of one or more trusts to hold and manage your assets for the benefit of your children during their minority in the unthinkable event of the demise of both parents.

The selection of a legal guardian for your minor children if both parents decease is perhaps the most crucial component of estate planning for young families. You may select grandparents, aunts and uncles, cousins, or even close friends who are not related. For many, the choice is easy or obvious. Yet for others, this can be a daunting and seemingly unsolvable task. I have had clients tell me that they really want to put their estate plan in place, but they cannot because they just can't choose a guardian. This is NOT a good reason to delay or suspend the creation of an estate plan. My advice is to select the best among the bad options. In the absence of your guardian designation, the courts will control the decision of guardianship, and your children may well end up in the hands of the person(s) you would least want raising your children, or even worse, in the social services system. So bite the bullet and make that decision, even if it isn’t perfect.

In addition to executing your wills and designating guardians, I recommend the creation of one or more trusts whose purpose it will be to hold, manage, spend and ultimately distribute your assets for the benefit of your children. Within the trust, you will designate trustee(s) who will be responsible for these tasks. The trustee(s) may or may not be the same person(s) as the designated guardians, and there are pros and cons to choosing the same person for both tasks. The trust will set out the terms on which your trustees will manage, invest and spend your assets for your children’s benefit during their minority. It will also allow you to determine at what age, or ages, your children will be entitled to receive outright distribution of all or a portion of their trust shares. In the absence of a trust setting out such provisions, the assets will be held for your children in a statutory (UTMA) structure, and will become available to your children free and clear at age 18. For most parents who have saved to fund their children’s college educations and want to ensure that the funds will be used for education and related purposes, this would not be the desired outcome. A trust permits you to delay outright distribution of assets until a later age, while still permitting the assets to be available to the children, at the discretion of the trustees, for appropriate uses.

A simple essay such as this cannot fully set out all of the considerations which go into a comprehensive estate plan for young families. The message here is simply that if you are the parents of minor children, I believe you have a responsibility to have wills and a trust in place. It is a gift that you will leave to your children in the unimaginable circumstance that neither parent survives to see your children into adulthood.

Time To Refinance Your Home Mortgage?

2008-12-05T09:03:00.001-08:00

Is it time to refinance your home mortgage? The New York Times thinks so. Rates have dropped, and mortgage applications are up. If your credit is good and you have at least 10 to 20 percent equity in your home, you are a good candidate for refinancing, and this could save you substantial money on your monthly mortgage payment. Read what the Times has to say about this at http://www.nytimes.com/2008/12/04/business/04refi.html?_r=1&adxnnl=1&emc=eta1&adxnnlx=1228496528-TOleZIqt0+u7goQtpYZDNA .

Do I REALLY need that owners title insurance policy?

2008-12-02T14:17:00.000-08:00

I am often asked by home buyers whether they really need to buy owners title insurance. The answer is an unequivocable "absolutely". I know insurance is one of those products that people love to hate—you spend a lot of money on something you hope you will never need, but isn’t that the point? Owners title insurance provides a whole lot of protection on the most valuable investment most people will make in their lives. The premium is paid only one time, at the purchase of the policy, and the protection remains in effect, with an inflation factor on the coverage, for as long as you own the home. Not such a bad deal.

So what does owners title insurance cover? In my view the most important thing it insures against is human error. In preparing for a purchase, a title search will be done at the registry of deeds. Said registry of deeds is run by humans, and errors in the indexing of documents are inevitable. If a name is misspelled, or some other irregularity occurs as a document is input into the system, it may not thereafter show up in a chain of title search. Among other things, title insurance protects against many defects in title that a proper registry search would not reveal.

The benefit of owners title insurance is more often not that it indemifies for a loss, but rather that it provides "costs of defense" in the event of a claim. In truth, most title defects are fixable, and it is rare that a property owner experiences a total loss of title. Costs of defense means that if an insured defect in your title is discovered, the title insurance company will step in and take the responsibility to cure it. One of the most common uses of title insurance is the situation when you are about to sell your house, and a few days before closing you are notified that an old mortgage from a prior owner in the chain of title was never discharged, or that the discharge was in some manner defective. Without owners title insurance, odds are the closing will get postponed while you scramble to track down a lender who may have merged 4 times since the original transaction in order to get the correct discharge. If you have an owners policy, on the other hand, in most cases your title insurer will agree to indemnify the new buyer, lender and title insurance company and clean up the problem, without any delay in closing.

Title insurance companies have developed several different levels of policy coverage, and they do vary somewhat among the companies. In addition to insuring clear title, the standard owners policy insures against (a) forgeries in documents; (b) incompetency or incapacity of a signatory; (c) missing signatures; (d) undisclosed (but recorded) prior mortgages, liens, easements or restrictions; (e) errors in legal descriptions; (f) lack of a right of access; and
(g) deeds not properly recorded.

"Extended" or "enhanced" policies, which are available for about 10% more, also cover against such additional defects (depending on the policy) as: (a) off-record matters, such as claims for adverse possession or prescriptive easements; (b) encroachments; (c) off-record liens such as mechanics' or estate tax liens; (d) certain violations of land use (subdivision and zoning) laws; and (e) certain post-policy occurrences.

The loan policy that you will be required to purchase for your lender as part of your closing costs does not provide you as owner with any protection, so don’t be fooled. You need your own owners policy. If you purchase both the loan and owners policies simultaneously, the combined premium is discounted from the total amount which would be paid if they were purchased separately. Premiums are calculated at a fixed dollar amount per thousand of coverage, and in Massachusetts the premiums at present are the same among all title insurance companies.

So the next time you are buying a property and are asked whether you want the owners title insurance coverage, say yes. Don’t be "penny wise and pound foolish" and use this opportunity as a place to save on closing costs. Be sure to include the owners policy premium when calculating your probable total purchase expenses, and do the smart thing and buy the owners policy. Yes, it is one of those products that you hope you never need, but if it turns out you do need it and did not get it, you will be sorry.

Engage With Grace: End of Life Decisions

2008-11-26T10:23:00.000-08:00

Today marks the launching of a "blog rally" spurred on by Engage With Grace, an organization designed to encourage discussion and decision regarding end of life issues. As stated on their website (http://www.engagewithgrace.org/) , "we make choices throughout our lives – where we want to live, what types of activities will fill our days, with whom we spend our time. These choices are often a balance between our desires and our means, but at the end of the day, they are decisions made with intent. Somehow when we get close to death, however, we stop making decisions. We get frozen in our tracks and can't talk about our preferences for end of life care. According to studies, 75% of Americans would prefer to die at home, but anywhere between 20-50% of Americans die in hospital settings." Many surveyed confirm that the important, detailed discussions regarding end of life care have not taken place with loved ones. Engage with Grace has designed the "One Slide Project" with the simple goal of getting the conversation about end of life experience started. They hope that this one slide, with just five questions designed to help get us talking with each other and with our loved ones about our preferences, will be widely disseminated in order to educate people to communicate their preferences so that we can all end our lives in the same purposeful way we live them.

I commend Engage With Grace for their efforts in this area. As an estate planner, I regularly have this discussion with clients and encourage all to execute a Health Care Proxy setting out preferences for end of life care and treatment. I also encourage clients to have a detailed and frank discussion with the appointed holder of the Proxy, and other loved ones, about the choices expressed in the document so that fully informed decisions regarding care may be made by loved ones at the appropriate moment, based on a clear understanding of the wishes of the principal. Regardless of your particular wishes or philosophies regarding end of life care, a clear and well considered expression of intent is a gift to your loved ones and a most empowering way to influence the end of your life in the same way you have lived it. So here is the "one slide"- I encourage everyone to consider these issues, have the discussion with loved ones, and most of all, confirm them in a legal document that will be binding when the time arrives.

Annual Gift Tax Exclusion to Increase in 2009

2008-11-21T09:03:00.001-08:00

The IRS has announced that the annual gift tax exclusion will increase from $12,000 to $13,000 effective January 1, 2009. The gift tax exclusion is the amount the IRS allows a taxpayer to gift to another individual without reporting the gift or incurring any gift tax liability. The number of different individuals to whom gifts may be given is unlimited.

Lifetime gifting can be an effective tool for estate planning purposes. Individuals may elect to make gifts of the annual exclusion amount to one or more individuals per year as a way of reducing the value of their total taxable estate. For example, a married couple with three children could give away up to $78,000 to their children each year ($13,000 per child is 6x$13,000=$78,000), thereby substantially reducing their potential estate tax liability over a period of years.

Lifetime gifting should be considered in concert with other estate planning techniques in establishing the most advantageous plan for you and your heirs and beneficiaries.

Estate Planning 101

2008-11-21T04:48:00.000-08:00

No matter what your age, financial wealth, marital status or family structure, a well-considered estate plan is an essential tool to the orderly management and distribution of your estate upon death or incapacity. Estate planning may help you (a) protect your assets from unnecessary administrative and tax costs; (b) appoint particular individuals to act on your behalf in the event you are unable to act yourself; and (c) manage and distribute assets after death. A sound estate plan can ease the orderly administration and distribution of your estate in many ways, among them:

Distribution of assets to beneficiaries of your choosing, rather than according to a statutory scheme;
Designation of guardians for minor children by your directive, rather than by court proceeding;
Appointment of executors and trustees according to your wishes who will have the power to manage all of your business affairs;
Management and protection of assets for the benefit of your children until they attain the age you determine is appropriate for outright distribution to them;
Avoidance of conflicts among family members;
Reduction or elimination of estate taxes;
Streamlined distribution of assets to avoid the costs and delays associated with probate; and
Establishment of instructions regarding health care treatments in the event of incapacity.

In future posts I will discuss the various individual components of a comprehensive estate plan.

Estate planning for many people is a task they intend in good faith to attend to but lose track of doing in the hustle and bustle of every day life. I urge everyone to take the time to put your affairs in order. None of us likes to think of the possibility of accident or serious illness, but as we all know, life is very uncertain, and having an orderly estate plan in place is a gift to the loved ones you leave behind.

Tip for Real Estate Practitioners in Middlesex County

2008-11-19T10:14:00.000-08:00

If you are a practitioner in Greater Boston handling transactions in cities and towns whose land records are maintained at the Middlesex North Registry of Deeds in Lowell (Billerica, Carlisle, Chelmsford, Dracut, Dunstable, Lowell, Tewksbury, Tyngsborough, Westford and Wilmington), you will be happy to know that you no longer have to travel up to Lowell to record your closing documents for recorded land. Effective November 3, 2008, the recording counter at the Middlesex South Registry of Deeds in Cambridge will accept in-person land recordings for the North Middlesex District. This does not pertain to registered land documents or plans, but this new convenience is likely to save you at least a few trips north each year.

Hard work and scrappiness pays off . . .

2008-11-18T16:13:00.000-08:00

. . . and incredible talent never hurts either. Congratulations to Dustin Pedroia on being named American League MVP for 2008 (not to mention the Gold Glove and Silver Slugger)!!! Only 144 more days until Opening Day!

HUD Announces Mortgage Reforms

2008-11-16T06:54:00.000-08:00

For those of you in the real estate industry, whether as a mortgage lender, broker, attorney or consumer, this news is big. For the first time in more than 30 years, HUD (the U.S. Department of Housing and Urban Development) has announced mortgage reforms designed to help consumers better understand the mortgage process, allow them to compare a variety of different products, and protect against increases in closing costs once disclosed. HUD has revised the long-used “Good Faith Estimate of Settlement Charges” (GFE) and the form settlement statement (HUD-1) used at closings to provide clearer and more easily understandable information to consumers. The new forms and regulations go into effect on January 1, 2010.

The new rules include the following:
1. The GFE will be easier to read and provide simpler disclosures regarding loan term, interest rate information and prepayment penalties.
2. The GFE will set out closing costs in detail, display all prominently and group them into major categories to prevent “junk fees” and allow consumers more easily to compare different loan offers.
3. Changes to closing costs between the GFE and settlement statement are limited as set out on the GFE. The final settlement statement form has been revised so that each line on the final statement will make reference to the relevant line from the GFE.
4. Payments from lenders to mortgage brokers must be disclosed in clearer detail.
5. Lenders must provide the GFE to borrowers three days after receipt of all necessary information.

For more information, or to see the revised forms, visit
http://www.hud.gov/news/release.cfm?content=pr08-175.cfm.

I think these are welcome changes. Admittedly this puts a greater burden on those in the industry to get the information right the first time, but the new forms are far easier to understand and will remove much of the mystery in the mortgage loan process. I am all for anything that helps the clients to be informed participants in their own transactions.

Why I do what I do

2008-11-12T14:43:00.000-08:00

There are many reasons why I enjoy my practice of law, but no more so than the reason I was reminded of this afternoon as I conducted a real estate closing for a young, recently married couple buying their first home together. It was late in the afternoon and the air was palpable with excitement. It was clear that the sellers and the buyers have gotten along wonderfully from the outset, and the atmosphere was friendly and collegial. There was much chatter and laughter throughout the closing. When we finished signing the papers and the ceremonial transfer of keys occurred, they broke out a bottle of champagne and disposable glasses that they had brought along, poured a glass for everyone in the room, and toasted the celebration of this new milestone in their lives. We sat in the conference room enjoying our champagne, trading stories and laughing for close to another half hour. Everyone hugged one other as they departed, and my clients left agog with the excitement of going to spend their first night together in their new house. Watching this process unfold over the course of the afternoon, and witnessing the excitement in my clients' faces, I was reminded again why I do what I do-- while I certainly enjoy the intellectual and technical challenges that practicing law provides, it's the relationships I build with the people whose paths I cross, the ways in which I am able to help them achieve their goals, and the joy and satisfaction I get from knowing that I can make a positive difference that really mean the most. So here's a toast to the new homeowners-- may you build a happy home together, and thank you for allowing me to help you start on your way.

A good scam

2008-11-12T05:04:00.000-08:00

A client contacted me recently about a solicitation she received in the mail from a company offering to provide her with a copy of the deed to her recently purchased home for a mere $60! She wondered if it was important for her to do this. Don't be fooled by this-- it's a huge scam and money waste for any homeowner. Know that a copy of any document relating to your real estate and recorded at the registry of deeds may be obtained from the registry for the cost of the photocopy (about $1 per page). Additionally, records of all Massachusetts registries of deeds are now available online and most provide access to all documents and free downloadable copies (there are a few exceptions which require a subscription in order to print out copies). So don't be fooled by this solicitation-- your $60 can be better spent in countless other ways.

"Happy Law"

2008-11-11T20:33:00.000-08:00

I limit my practice to transactional and collaborative areas. I don't litigate, I don't do divorce work, and I try very hard to stay out of any courtroom. Why is this? The answer is because I don't like to fight. Now don't misunderstand, I am a very effective negotiator and can be as forceful and tenacious as I need to be in a difficult transaction, but philosophically I so far prefer to spend my time working with parties in situations where everyone gets what they want at the end. In litigation, and family law, there is necessarily a winner and a loser. At the end of a real estate closing, most of the time all parties go home happy, having achieved what they set out to do. The execution of a set of estate planning documents by the client at the end of a collaborative process is a wonderful moment of achievement and satisfaction. The formation and start-up of a new business entity or the resolution of an operational challenge is cause for celebration. My husband calls it "happy law". I like the sound of that.

Why a solo practice?

2008-11-10T19:49:00.000-08:00

People have asked me why I ended up as a solo practitioner rather than part of a law firm. There are so many reasons! Some tease me that I don't "play well with others", but that's really not true-- it's just that I am a major control freak! All kidding aside, though, what I love most about being a solo practitioner is that I have the opportunity to work closely with clients on a one-on-one basis and to develop wonderful and lasting relationships as we work together. Clients become friends; friends become clients. Strong connections are forged and the collaboration between me and my clients allows for a multi-dimensional experience. When you engage my services, you know you are getting me, not a team of fungible young associates or paralegals in the back room. As a solo, I really get to know my clients well, and I can see up close and personal the ways in which my services can make a difference. Nothing feels better than the moment when the client gives me an enthusiastic "thank you" as we finish our business together, and I come away knowing that I have had a postive impact on their lives.

Who Am I?

2008-11-07T18:47:00.000-08:00

Since this is a new blog, I figure I ought to tell you a little bit about myself. I was born in Boston and grew up in Newton. I received a B.A., summa cum laude, from Tufts University in 1981. I went on to the University of Pennsylvania Law School and received my J.D. in 1984. Following graduation, I returned to Boston and spent two years at the Boston firm of Rackemann, Sawyer and Brewster. From there I moved to a smaller firm, McDermott & Rizzo, which in 1990 merged into the Boston office of Kirkpatrick & Lockhart. While these moves were all great career opportunities, I came to realize that I really was meant to be a small or solo practitioner, so in 1993 I left big law firm life, hung my shingle in Wellesley, and jumped off the cliff, not knowing if I would land or crash. Happily, I landed on my feet and have been successfully enjoying a solo practice for the past 15 years. I have been a resident of Needham for 18 years and live with my husband, Richard Miller, my two daughters, now 16 and 13, and a menagerie of animals that includes two beagles, two cats, two hamsters and a tortoise. In my leisure time, I am a New York Times Crossword puzzle fanatic; a cutthroat player of Scrabble, Boggle and all other word games; a voracious reader of fiction; the director, singer and arranger for a women's a cappella quintet called Boston Uncommon; a pianist; a knitter; a part-time student in the Jewish Music Institute of Hebrew College in Newton; and an active participant in my synagogue. So that's a taste... more to follow later.

Welcome to my blog

2008-11-07T13:29:00.001-08:00

Greetings, all and welcome to my new blog. I must confess that I have been resisting the suggestion to start blogging for quite some time, but I am now ready to join the 21st century. I hope you will find useful information, interesting personal thoughts, and advice and assistance on relevant issues. I welcome you and hope you will enjoy and visit often.