By Matthew A. Quick In light of the recent holding in Town of Normal v Hafner, when individual sole proprietors construct private residences on privately owned land with financing from private banks are not obligated to pay prevailing wage to laborers working on the project, because they are not considered a public body and private multifamily residences are not considered public works under the Prevailing Wage Act, to wit, Chapter 820 of the Illinois Compiled Statutes, Act 130. The court opined that the purpose of the Prevailing Wage Act is to ensure prevailing wage is paid on public projects, not to interfere with private economic development.
Real Estate and a Certificate of Trust Existence and Authority (Michigan)
By Matthew A. Quick As provided in MCL 565.431, et seq., a certificate of trust existence and authority (referred to as a "certificate of trust") or the entire trust declaration may be filed at a register of deeds office. Filing either a certificate of trust or the entire trust declaration when real property is placed into trust is beneficial and, in some cases, necessary for the orderly administration of the trust (allowing for smoother transfer of real property held by the trust). Filing a certificate of trust over the entire trust declaration is beneficial for several reasons. First, a certificate of trust is a shorter document, which does not cost as much to file with a register of deeds office. Second, a certificate of trust is a much more private option because it only contains excerpts of the actual trust document and does not include distribution provisions, among others. Third, an updated trust declaration must be filed with a register of deeds office if portions of the trust declaration are modified or revoked. If a certificate of trust is originally filed, a new certificate of trust is only required if the excerpted portions contained in the certificate of trust are changed.
The requirements of a certificate of trust are as follows, pursuant to MCL 565.432:
(a) The title of the trust. (b) The date of the trust agreement and any amendments to the trust agreement. (c) The name of the settlor or grantor and the settlor's or grantor's address. (d) The names and addresses of all of the trustees and successor trustees. (e) The legal description of the affected real property. (f) Verbatim reproductions of provisions of the trust agreement, and any amendments to the trust agreement, regarding all of the following: (i) The powers of the trustee or trustees relating to real property or any interest in real property and restrictions on the powers of the trustee or trustees relating to real property or any interest in real property. (ii) The governing law. (iii) Amendment of the trust relating to the trust provisions described in subdivision (a) to (f)(ii). (g) Certification that the trust agreement remains in full force and effect. (h) A list of names and addresses of all persons who, at the time the certificate of trust is executed, are trustees of the trust.
Pursuant to MCL 565.433:
A certificate of trust existence and authority shall be executed by the settlor or grantor; an attorney for the settlor, grantor, or trustee; or an officer of a banking institution or an attorney if then acting as a trustee. The certificate shall be in the form of an affidavit.
On the issue of third-party reliance, MCL 565.435 provides:
A purchaser or other party relying upon the information contained in a recorded certificate of trust existence and authority shall be afforded the same protection as is provided to a subsequent purchaser in good faith under section 29 of chapter 65 of the Revised Statutes of 1846, being section 565.29 of the Michigan Compiled Laws, and shall not be required to further examine the trust agreement, unless an instrument amending or revoking the trust agreement or certificate of trust existence and authority is recorded in the same office in which the trust agreement or certificate of trust existence and authority was recorded.
Mechanic's Liens and Notaries (Illinois)
By Matthew A. Quick In light of the holding in Weydert Homes, Inc v Kammes, No. 2-08-0768, a contractor's statement under oath is not sufficient to fulfill the requirements of the Mechanic's Lien Act if it does not contain a notary's signature and seal. The failure to secure a notary's signature and seal renders a mechanic's lien invalid in an action to foreclose, but does not prohibit contractor from suit for breach of contract or quantum meruit recovery.
Jury Trial and Real Estate (Illinois)
By Matthew A. Quick Pursuant to the holding in Anderson v Klasek, No. 5-07-0390, the Residential Real Property Disclosure Act, Consumer Fraud Act and Real Estate License Act are not actions at common law and provide no right to trial by jury.
Fair Housing Act
By Matthew A. Quick In light of the recent holding in Bloch v Firschholz, No. 06-3376, current condo owners may, pursuant to FHA, assert any alleged discrimination that occurred after acquisition of condo under sections 3604(b) and 3617 for post-acquisition conduct.
Right of Redemption (Illinois)
By Matthew A. Quick In light of the recent holding in the case of In re Application of the County Treasurer , No. 2-08-0570, one who is under contract to purchase real estate has an equitable interest sufficient to exercise tax redemption. The court noted:
A complete stranger to the property has no right to redeem, but section 21--345 of the Code does not require complete legal title in order to redeem. In re Application of the Cook County Treasurer, 185 Ill 2d 428, 433 (1998) (Loop Mortgage). A party seeking to redeem a property sold at a tax sale need have only an "undefined interest" in the property. People v Hess, 7 Ill 2d 192, 197 (1955). Courts have expanded the class of persons with a redeemable interest to include persons who have something less than legal title, record title, or interests of record. See, eg, Loop Mortgage, 185 Ill 2d at 432.
Courts have held that the following persons have possessed an interest sufficient to redeem: an equitable title holder under an agreement to convey (Franzen v Donichy, 9 Ill 2d 382 (1956)); a beneficial owner of stock owned by a dissolved corporation, even though the property was not listed as an asset in the dissolution of the corporation (People v Hess, 7 Ill 2d 192 (1955)); an adverse possessor (In re Application of DuPage County Collector, 98 Ill App 3d 950 (1981)); a person who had lived on the property for more than 30 years even though he was no longer a record title holder (In re Application of County Collector, 49 Ill App 3d 1048 (1977)); a neighbor who acted as an agent for a mortgagee (Purdy v CH Strong Elevator, Inc, 29 Ill App 3d 894 (1975)); an assignee of a beneficial interest in a land trust (In re Application of the County Treasurer, 16 Ill App 3d 385 (1973)); the executor of an estate (In re Application of the County Collector for Judgment & Sale against Lands & Lots Returned Delinquent for Nonpayment of General Taxes for the Year 1961 & Prior Years, 72 Ill App 2d 272 (1966)); and a grantee of an heir of a contract purchaser who received no deed (In re Application of the County Treasurer of Du Page County, Illinois, for Judgment & Sale of Real Estate for General Taxes for the Year 1960, 63 Ill App 2d 135 (1965)).
It makes no difference whether the purchaser under contract has closed on the property, the contract to purchase itself is sufficient to create an equitable interest (meeting the threshold of "undefined interest" as discussed above) in the property, thus allowing the purchaser under contract the right of redemption.
Real Estate Tax Proration
By Matthew A. Quick For an article more specific to Cook County tax proration go here.
Real estate tax proration is an issue that is normally addressed when transferring real property. Tax proration involves calculating the amount of tax owed on real estate for the time the real estate was owned.
In general, property taxes are for payment of government services. Property taxes are either paid in advance or in arrears and can be subject to different due dates. When property taxes are paid in advance that means government services are being purchased before they are used. An example is when taxes are paid on the first date of a fiscal year for the entire year. When property taxes are paid in arrears, government services have already been expended and the property taxes are intended to reimburse the government. An example is when taxes are paid on the last date of a fiscal year for the preceding year.
If the transfer of a home, thus the transfer of government services, occurs in the middle of a fiscal year, the transferor (the seller) only utilized the government services until the point of transfer and the transferee (the buyer) only utilizes the government services after the point of transfer. Fairness dictates that the transferor and the transferee only pay for government services while owning the property.
Prorating the proper amount of tax involves figuring whether the tax to be prorated is paid in advance or in arrears, then figure the start of the fiscal period. Count the number of days from the start of the fiscal period to the date of transfer (the closing date). Multiply the daily tax rate by the number of days. If the property tax was paid in advance, then the amount yielded is paid to the transferor. If the property tax is to be paid in arrears, then the amount yielded is paid to the transferee.
Successor Trustees and a Limited Power to Convey Real Estate (Michigan)
By Matthew A. Quick Pursuant to Land Title Standard 8.5 of Michigan, "If an express trust contains a power of sale which is not limited to the named trustee, a successor trustee may convey real property pursuant to the trust terms. If a trust does not contain a power of sale or contains a power of sale limited to the named trustee, the probate court may enter an order removing any trust provision limiting the successor trustee's power of sale, thereby permitting the successor trustee to convey real property pursuant to the court's order." The authority for this Land Title Standard is derived from MCL 700.1302, 700.7201 and 700.7402.
In cases where a general, thus unlimited, power to convey real property exists pursuant to a non-testamentary trust declaration, and a successor trustee is appointed by the court, the appointed successor trustee receives the power to convey real property without particular order of the court. However, in the event the power to convey real property is limited to the named trustee in the trust declaration, the court must order that the appointed successor trustee has the power to convey real property. This rule does not apply to situations involving a testamentary trust, because the probate court has jurisdiction to appoint successor trustees after a sole, or other successor trustee, is removed. MCL 700.7201 and 700.1302.
Court Revoking Real Estate Contract for Disabled Person (Illinois)
By Matthew A. Quick In light of the recent holding in Perry v The Estate of Irene Carpenter, equitable considerations are a proper basis for a court to set aside a contract for sale of a disabled person's home, especially where circumstances indicate fraud and unfairness. As held in previous cases, “Courts are under a duty to protect the interests of a minor or a disabled person who is party to the judicial proceedings before it.” Valdovinos v Luna-Manalac Medical Center, Ltd, 328 Ill App 3d 255, 272; 764 NE 2d 1264, 1277 (2002). “Gross inadequacy of price is not of itself sufficient to set aside a judicial sale, yet when such inadequacy is shown, coupled with slight circumstances indicating unfairness or fraud, either upon the part of the officer, the purchaser or the party to the record benefitted by the sale, it will be sufficient for equitable intervention.” Milner v Denman, 21 Ill 2d 182, 190; 171 NE2d 654, 658 (1961); quoting Rogers v Barton, 386 Ill 244, 250; 53 NE2d 862, 865 (1944).
Housing for Older Persons Act
By Matthew A. Quick Title VIII of the Civil Rights Act of 1968, as amended by the Fair Housing Amendments Act of 1988 (also referred to as the "Federal Fair Housing Act"), prohibits discrimination in housing and real estate-related transactions based on race, color, religion, sex, national origin, handicap and familial status (the presence of children under the age of 18 in the household). On the issue of familial status, the Federal Fair Housing Act creates an exemption for discrimination when the housing community is for older persons (also referred to as the "Housing for Older Persons Act" or "HOPA"). 42 USC 3607. That is to say that a housing community for older persons may discriminate against certain families.
A housing community for older persons means housing that is: (A) provided under any State or Federal program that the Secretary determines is specifically designed and operated to assist elderly persons (as defined in the State or Federal program); or (B) intended for, and solely occupied by, persons 62 years of age or older; or (C) intended and operated for occupancy by persons 55 years of age or older, and: (i) at least 80 percent of the occupied units are occupied by at least one person who is 55 years of age or older; (ii) the housing facility or community publishes and adheres to policies and procedures that demonstrate the intent required under this subparagraph; and (iii) the housing facility or community complies with rules issued by the Secretary for verification of occupancy, which shall: (I) provide for verification by reliable surveys and affidavits; and (II) include examples of the types of policies and procedures relevant to a determination of compliance with the requirement of clause (ii). Such surveys and affidavits shall be admissible in administrative and judicial proceedings for the purposes of such verification.
The Estate, Issue Four
By Matthew A. Quick Wills
A Will (also known as a “Last Will and Testament”) is a legally-binding instrument that, in the event of death, directs property and the care and custody of minor children. A Will does not direct all property in a person’s estate while they are living, only the property that remains titled solely in the name of the deceased. For example, a Will does not direct property that is transferred to a beneficiary at death (as is usually the case with life insurance); a Will does not direct property or accounts that are held jointly and remain with the survivor (such as jointly held real estate or bank accounts); nor does a Will direct property that has been placed in a trust during the decedent’s lifetime.
Regarding the care and custody of minor children, a Will can propose a guardian. In most instances, a Guardianship Information Form or Letter of Intent Information Form is incorporated into the Will, thus giving the proposed guardian information regarding the minor children that includes medical and educational history, religious preference, special needs, recreational activities and other helpful information.
Furthermore, a Will makes arrangements for the payment of debts, taxes, expenses and costs, and elects a person to take the necessary legal steps to carry out the instructions put into the Will (referred to as a “Personal Representative” or “Executor/Executrix”).
In order for a Will to function it must be given power by a court through a process referred to as probate. During the probate process, the Will is authenticated; creditors, fees, costs and taxes are paid; and the directions of the Will are followed. Probate can be costly and time consuming, thus an educated analysis of one’s estate should be completed to determine whether probate should and could be avoided. CAVEAT: consult an estate planning professional before changing ownership of property to avoid probate; the consequences of changing ownership could be unintended and detrimental without appropriate consideration.
Regardless of how complex or simple the estate, a Will is always included in an estate plan, whether it is used to dispose of someone’s entire estate, direct the care and custody of minor children or act as a safety-net for property that was accidentally not included in a trust or other arrangement. Rather than a simple form that can be purchased online or at an office supply store, a Will is a document that requires significant thought to include proper detailed instructions and avoid improper taxes and fees.
-Dental Insurance-
This article unfortunately cannot contemplate all types of dental insurance; however, let us consider the two primary dental insurance models: managed care plans and fee-for-service plans. Managed care plans, according to the American Dental Association (www.ada.org), are cost containment systems that direct the utilization of health care. In other words, a managed care plan controls medical costs by (a) restricting the type, level and frequency of treatment; (b) limiting the access to care; and (c) controlling the level of reimbursement for services.
Two main divisions of managed care plans have emerged: a Dental Preferred Provider Organization (referred to as a “Dental PPO”) and a Dental Health Maintenance Organization (referred to as a “DHMO”). A Dental PPO allows the patient to choose a dentist regardless of whether the dentist is in-network or out of network. An in-network dentist under a Dental PPO is contracted by the insurance company to receive a discounted fee for services. Alternatively, an out of network dentist under a Dental PPO does not have a contract with the insurance company; thus, the patient would then likely have to co-pay for services.
According to the American Dental Association, a DHMO is a capitation plan that pays contracted dentists a fixed amount (usually on a monthly basis) per enrolled family or individual, regardless of utilization. In other words, in exchange for a fee, a patient would have access to dentists that are paid by the insurance company. In return, the dentists agree to provide specific types of treatment to the patient at no charge (for other treatments, a co-payment is required). Theoretically, the DHMO rewards dentists who keep patients in good health, thereby keeping future costs low. DHMO models typically offer the least expensive dental plans.
A fee-for-service plan (known as a “dental reimbursement plan” or “DR Plan”) is typically a freedom-of-choice arrangement under which a dentist is paid for each service rendered; and is the insurance plan recommended by the American Dental Association. A DR Plan differs from a managed care plan because the patient pays the dentist directly for each service provided rather than the dentist receiving payment from an insurance company. A patient is reimbursed for the cost of the service by an arrangement with the patient’s employer. The patient can seek service from any dentist under this type of insurance plan and does not have to worry about whether the dentist is in a specific network. Ultimately, a DR Plan offers the patient great freedom and offers both the patient and the dentist broad authority to make decisions that are most beneficial to the patient.
Please visit the American Dental Association’s website, as referenced above, for a list of items to consider before choosing an appropriate insurance plan.
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Adam Winckler, D.D.S., enjoys a general dentistry practice with The Waters Dental Group in Sandwich, Illinois, and Geneva Family Dental in Geneva, Illinois. Dr. Winckler invites any questions or comments via the website of The Waters Dental Group (www.watersdentalgroup.com); the website of Geneva Family Dental (www.genevafamilydental.com); or by phone at 815.786.2146.
-Update-
Illinois has enacted the Banking Convenience Account for Depositors Act. Much like its Michigan counterpart, the Illinois Act permits a convenience account holder to be added to a bank account. In practice, the financial institution may deal with the person that is a convenience account holder as though they were an owner of the account. However, the convenience account holder does not hold title to the money in the account, thus would not be given the money upon the owner’s death. The convenience account holder is not considered to be a joint owner in the deposit account, simply someone that is helping.
The Illinois Secretary of State will act as a depository for wills and trust documents that a lawyer is safekeeping. In order to deposit the Will or trust, however, the attorney must certify that the person who created the documents cannot be located after a diligent search.
Illinois Real Estate Methamphetamine Disclosure. A seller of real estate in Illinois must now disclose whether the property for sale has been used for methamphetamine manufacture.
-Conclusion-
I hope this issue of The Estate has been helpful. Please feel free to contact me with any questions or concerns, or to schedule a complimentary consultation. As a service to all current and prospective clients, I travel at no charge to all meetings and consultations throughout Michigan and Illinois. In addition, informational sessions regarding special needs planning and estate planning are provided free to groups of any size. Please let me know if there is any way I can help.
Mechanics Lien Act (Illinois)
By Matthew A. Quick Public Act 96-654 has amended the Mechanics Lien Act to require a contractor who improves a single-family dwelling that is owner-occupied to give the owner written notice within ten (10) days after recording a lien against the property of the owner. In the event such notice is not given and it causes the owner to suffer damages before the notice is given, the lien shall be extinguished to the extent of the damage. This law is effective for contracts entered into after January 1, 2010.
Coach House Owner-Occupied (Chicago)
By Matthew A. Quick In light of the recent holding in Berven v Marquette National Bank & Trust, No. 1-08-3296 (1st Dist. Aug. 11, 2009) (Cunningham) (Cook County). A coach house that is considered incident to an owner-occupied building (which means it passes under the same title as an owner-occupied dwelling) is "owner-occupied" within meaning of the Residential Landlord and Tenant Ordinance of City of Chicago. Thus, it is exempt from the Ordinance's provisions. Any building included within the definition of landlord's dwelling unit is considered "owner-occupied" within meaning of Ordinance's exclusions.
The Estate, Issue Three
By Matthew A. Quick Living Wills and Medical Orders
Living wills and medical orders communicate a patient’s wishes regarding health care when the patient is unable. If a person does not have a power of attorney for health care, a living will may be used to inform of the care one wishes to receive. Alternatively, a medical order (referred to as a “Do-Not-Resuscitate Order” or “DNR”) is a document that expresses a terminally ill patient’s wish to not be resuscitated if his or her heart or breathing should stop.
In practical terms, a power of attorney may be more flexible because an attorney-in-fact can respond to unexpected circumstances, but a living will or medical order can be honored without the presence of an attorney-in-fact to make the actual decision. If one does not wish to give the power to make decisions regarding care to someone else, living wills and medical orders are ideal estate planning instruments to communicate wishes regarding care—remember: wishes cannot be honored if they are not known.
-Reverse Mortgages-
A reverse mortgage (also referred to as a “lifetime mortgage”) is a way to utilize the equity of a home without having to sell it. Reverse mortgages were created about twenty years ago by the Department of Housing & Urban Development (referred to as “HUD”) as a tool to save seniors from having to sell their homes in order to pay living expenses, which often led to sales at distressed prices.
A reverse mortgage works just as it sounds—the borrower receives payment from the lender instead of making payments to the lender. Payment may be received by the borrower monthly, in one lump sum, or both (e.g. a lump sum at the beginning and monthly payments thereafter). While the borrower receives payments under the reverse mortgage, the borrower is able to stay in the home. Every payment a borrower receives is added to a running balance and charged interest at an agreed-upon rate. To secure the amount of payments made to the borrower, a mortgage is executed between the borrower and the lender against the home. When the borrower permanently leaves the home, the amount lent under the reverse mortgage, plus any interest, is then repaid to the lender.
To qualify for a reverse mortgage, a borrower must be sixty-two years of age, complete financial counseling and meet any additional requirements of the lender. There are no income qualifications or minimum credit requirements for a reverse mortgage. Further, the proceeds of the reverse mortgage may be tax-free (be sure to consult your tax advisor), and there are no limits on how to use the funds.
In order for the borrower to keep a reverse mortgage in good standing, the borrower must, at least, keep current on the property taxes, maintain the home in good repair and carry insurance on the home. In addition, the lender can end a reverse mortgage and require immediate repayment if, among other things, the borrower files for bankruptcy, rents out part of the home, adds an owner to title or takes out a new loan against the property.
According to a recent study by the Employee Benefit Research Institute, seventy-six percent of workers expect to have the same or higher standard of living when they retire, but fifty percent have less than $50,000 in savings and investments. A reverse mortgage is a wonderful way of continuing one’s standard of living, but not the only way. If a reverse mortgage seems beneficial, contact your mortgage consultant to consider all of the options available.
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Brian Rozycki is a Mortgage Loan Specialist and invites questions or comments via phone at 847.721.7699.
-Life Insurance-
In the last issue of The Estate, we reviewed the basics of life insurance and potential uses. Let us now look towards the details of purchasing a policy.
The question of “How much?” is the primary issue to be addressed when purchasing a policy. In answering this question, we speak in terms of the face amount of the insurance policy, which is the amount paid upon the passing of the individual securing the policy. To come to an appropriate face amount, several factors are considered, which include payment of expenses, debts and income. To determine the appropriate face amount of a life insurance policy, the following website may be helpful: http://www.lifehappens.org/life-insurance/life-calculator.
After the face amount is determined, then we must decide who receives the benefit. Typically, the beneficiary of a life insurance policy will be the income earner’s spouse; or, in a dual income family, the spouses will name each other on their respective policies. In the alternative, the beneficiary of a life insurance policy could be a trust for the care and custody of a child or someone with special needs, or anyone else that the policy holder may designate. In certain situations, estate and tax issues may exist, thus it is wise to discuss the topic of life insurance with your estate planning attorney and financial advisor.
Regarding Term Insurance, to figure the length of the term, the policy holder should determine the amount of time he or she would need insurance. For a 40-year-old person that would need to replace his or her income until a retiring age of 60, a 20-year term would be desired. It is recommended that one initially secures the longest period of time that is needed, as premiums will likely increase if one must reapply in the future. If rates go down for any reason, a policy holder can always cancel the old policy and get a new one with the lower rate.
Life insurance policies can be purchased from several sources. Employers or associations can be great sources that can significantly reduce your rates. For example, teachers can purchase through the National Education Association, which provides life insurance in groups, thus reducing costs. The majority of insurance agents are reputable, but they operate on commission— the more insurance they can sell, the more they profit. Keep the amount of life insurance only to the level needed and only the type needed. Consider, insurance agents’ commissions increase significantly once you leave the realm of Term Insurance and move into Permanent Insurance, thus it is always helpful to get the opinion of your estate planning attorney and financial advisor before securing a policy.
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Clint Edgington invites any questions or comments via e-mail at C.Edgington@bhadvisory.com or via phone at 888.614.4625. Clint is the principal and co-founder of Beacon Hill Investment Advisory and is engaged in the practice of investment management and financial planning. Feel free to visit Beacon Hill’s web site at www.beaconhilladvisory.com.
-Update-
Michigan has enacted the Uniform Trust Code. Other than bringing Michigan into accordance with the trust laws of several other states, the advantage of adopting the Uniform Trust Code is two fold: it allows Michigan judges to easily look to the laws of other states for guidance in resolving cases and makes Michigan an attractive place to domicile trusts, thereby creating jobs of administration. The law goes into effect April, 2010. Please ensure your trust complies.
-Conclusion-
I hope this issue of The Estate has been helpful. In the event you have any questions or concerns, or would like to schedule a complimentary consultation, I am available by phone at 773.790.8058 or by e-mail at matthew@attorneymatthewquick.com. As a service to all current and prospective clients, I travel at no charge to all meetings and consultations throughout Michigan and Illinois. In addition, informational sessions regarding estate planning are provided free to groups of any size. Please let me know if there is any way I can help and feel free to contact me at any time.
Purchasing Real Estate from Trustees (Michigan)
By Matthew A. Quick The greatest concern for a buyer of real estate is whether title to the property is good and marketable. Good and marketable title generally means that, beyond a reasonable doubt, the title to property is free from encumbrances (but not necessarily free from the possibility or suspicion of encumbrances). If title to real estate is anything other than good and marketable, then there is a high probability that, in the future, the buyer will experience adversity regarding ownership of the property (the buyer is said to have "purchased a lawsuit").
The issue of receiving good and marketable title is especially important when dealing with a trustee, specifically, whether the buyer can receive good and marketable title from a trustee. There are certain rules of recording and conveyance that apply to real estate transactions involving trustees, which, if not followed, could certainly lead to a buyer purchasing a lawsuit. Foremost, in the event there are two or more trustees, then all trustees must execute the deed, unless the trust instrument provides otherwise. Michigan Land Title Standard 8.4. Failure to include the signatures of all trustees on the deed will result in the buyer receiving title that is not good and marketable.
In the event a trustee is deeded property and has no power or authority under the trust to manage it, or the trust that gives the trustee power and authority fails, the property immediately vests in the beneficiaries, and not in the named trustee. Michigan Land Title Standard 8.1. Thus, if a buyer attempts to purchase property from a trustee that has no power to sell, the buyer would receive nothing, because the trustee had nothing to convey--the beneficiaries would own and control the property outright.
When inspecting the deed to property, the buyer may find the word "Trustee" following the name of the seller, but if the deed contains no other reference to a trust or trust powers, then a purchaser can purchase the property outright without regard to possible limitations of any trust that may be in existence (so long as the buyer has no knowledge of the existence of a trust). Michigan Land Title Standard 8.2. However, if the seller turns out to be a trustee of an existing trust, and pursuant to the terms of the trust he or she did not have the power or authority to sell the property to the buyer, the buyer can expect some adversity from other trustees or the beneficiaries, if not a lawsuit, even though the buyer is considered to have purchased the property outright.
In the event the trust terms and existence are sufficiently expressed to constitute notice of the existence of a trust to a buyer, then good and marketable title is only passed to the buyer if the instrument containing the trust terms, or a certificate of trust existence and authority, is of public record, establishes a valid trust and contains a valid authority for the conveyance. Michigan Land Title Standard 8.3. Without challenging every provision of the trust or power of the trustee, Michigan law allows a buyer to assume the existence and proper exercise of trust powers if the buyer does not have actual notice that the trustee has exceeded his or her powers or has improperly exercised them. MCL 700.7404. Michigan law, however, does not shield a buyer from a lawsuit in the event the trustee is acting outside of his or her powers--the buyer may still expect some adversity from other trustees or the beneficiaries if the sale was not allowed by the terms of the trust.
To address the issues above, the buyer may easily require any trust instrument (in the event the buyer is notified of the possibility that a trust exists) and a deed executed by all of the trustees, in addition to a deed executed by all of the beneficiaries. Simply, if everyone who could possibly take issue with the transfer of property has joined in the conveyance, the probability of any subsequent adversity is greatly reduced.
Death of a Joint Owner (Michigan)
By Matthew A. Quick Pursuant to Michigan Land Title Standard 6.12, when joint ownership has been created, all of the joint owners are required to join in a transfer in order to convey full marketable title. In the event one of the joint owners has passed prior to joining in a transfer, his or her name should be noted in the conveyancing document as deceased and a certified certificate of death must accompany the deed.
Land Ownership and Subsequent Marriage (Michigan)
By Matthew A. Quick Pursuant to Michigan Land Title Standard 6.15, when people who are not husband and wife own real property as tenants-in-common or joint tenants, the ownership is not converted into a tenancy by the entirety by their subsequent marriage. In order to enjoy the ownership status of tenancy by the entirety, husband and wife would be required to execute a deed from themselves as tenants-in-common or joint tenants, to themselves as husband and wife (being sure the deed contains any name changes or an affidavit of name change accompanies the deed).
Landlords and the Crime Free Lease Addendum (Illinois)
By Matthew A. Quick If, during the term of a lease, any Tenant or occupant is charged with committing a Class X Felony on the leased premises, which includes, but is not limited to kidnapping, sexual assault, armed robbery and manufacture or sale of narcotics, and there is a judicial finding of probable cause at a preliminary hearing or indictment by a grand jury concerning the same charge, the Landlord may void the lease. 765 ILCS 705/5.
If the Landlord wishes to void the lease, the Landlord must post written notice at the leased premises requiring the Tenant to vacate the leased premises on or before a date five (5) days after giving of the notice. If the Tenant does not vacate the premises prior to the date given, the Landlord may utilize forcible entry proceedings. 735 ILCS 5/9-101, et seq.
In order for the Landlord to void the lease upon commission of a Class X Felony, however, the Landlord and Tenant must execute a lease addendum for drug free housing as promulgated by the United States Department of Housing and Urban Development, which has become commonly known and referred to as a Crime Free Lease Addendum.
Regardless of the intent of the Landlord, incorporation of this document into the lease agreement is required in some communities and select communities mandate every Landlord to attend a Crime Free Seminar. Landlords should contact the municipality in which the leased premises sits to determine if any Crime Free mandates exist.
Landlords and Lease Guaranties
By Matthew A. Quick All too often Landlords are failing to collect rent that is rightfully owed. Tenants that fall behind on rent are most often uncollectable and the Landlord is limited in the amount of security that can be received (in both practical and legal terms). A simple alternative to losing out on back rent, and other obligations, is to have the lease agreement guaranteed by a Guarantor of the Tenant. With the proper Guaranty, the Guarantor not only guarantees that rent is paid, but also that the provisions of the lease are fulfilled. The Guaranty may be incorporated into the lease agreement--the Guaranty does not have to be a separate document. In most instances, though, the Guaranty needs to be executed at the same time the lease agreement is executed.
The Landlord may require the Guarantor to submit to the same application process as the Tenant to ensure the Guarantor's financial security. As a practical note, if the Landlord requires a Tenant or Guarantor to submit to an application process, it is strongly recommended that the same application process is used with each subsequent Tenant or Guarantor applicant to avoid any accusations of bias or discrimination.
The Estate, Issue Two
By Matthew A. Quick -Powers of Attorney-
Powers of Attorney are legally binding documents that designate and appoint a person (referred to as an “attorney-in-fact”) to act on behalf of the individual planning his or her estate (referred to as the “principal”). These documents may give instructions on everything from religious requests to comfort care; payment of bills to access to safe deposit boxes (referred to as “directives”).
Powers of Attorney come in two basic forms. A Power of Attorney for Health Care nominates an attorney-in-fact (referred to as a “Patient Advocate” in Michigan and an “Agent” in Illinois), to make health care decisions for the principal. An attorney-in-fact under a Power of Attorney for Health Care must accept his or her role as such after reviewing the principal’s directives. This acceptance assures the willingness of an attorney-in-fact to act on behalf of the principal, and pursuant to his or her wishes, prior to the attorney-in-fact being required to do so. The ability of the attorney-in-fact to act under a Power of Attorney for Health Care commences upon disability or incapacity of the principal. Generally speaking, a principal is deemed disabled or incapacitated if he or she is incapable of making informed decisions regarding his or her health care.
A Power of Attorney for Property appoints an attorney-in-fact (referred to as an “Agent” in both Illinois and Michigan), to direct the principal’s affairs concerning property and finances. Unlike a Power of Attorney for Health Care, an attorney-in-fact under a Power of Attorney for Property can be given the ability to act for the principal even if the principal is not disabled or incapacitated. Although not required, an attorney-in-fact should be asked to accept their role under a Power of Attorney for Property to ensure their willingness to act as directed.
Powers of Attorney do not come in any one standard form, thus are an excellent way for each of us to assure our values and wishes are honored when we are unable to communicate the same. These instruments prevent the need for a guardianship imposed through the probate court, which is a process that is time-consuming, costly and completely devoid of a principal’s appointments, values and wishes.
In sum, Powers of Attorney allow a seamless transition from principals caring for themselves, to principals receiving care.
-Life Insurance-
For most, life insurance is a necessary component of a sound financial and estate plan. Life insurance is simply a contract between a policy owner and the insurer. Under a life insurance contract, the obligation of the policy owner is to either pay the insurer a premium lump-sum payment or premium payments on a regular basis. The obligation of the insurer is to pay out a lump sum death benefit to the policy owner’s beneficiaries upon the demise of the policy owner.
There are two major types of life insurance: temporary (referred to as “term”) and permanent. Term life insurance pays out a death benefit to the beneficiaries upon the demise of the policy owner, so long as the policy owner has paid a premium lump-sum payment, or has made regular payments, pursuant to the life insurance contract and the demise of the policy owner occurs within a limited term. At the end of the initial term of a term life insurance contract, the policy owner may attempt to secure insurance for an additional term; however, the insurer is not required to renew coverage based upon the original contract.
Permanent life insurance, on the other hand, pays out a death benefit upon the demise of the policy owner, regardless of any term, so long as the policy owner has paid a premium lump-sum payment, or has made regular payments, pursuant to the life insurance contract. If the policy owner has met the payment obligations, the insurer cannot usually cancel the policy owner’s permanent policy unless fraud occurred during application for the policy. These policies build cash value for both investment purposes and for paying the premium. Typical types of permanent insurance include whole life, universal life, and variable life policies.
Life insurance typically makes a poor investment; so, unless your situation dictates more complicated strategies, stick to term policies. They are cheaper and focus solely on what you want: life insurance. Common uses of life insurance include guarding a household’s income against the death of a breadwinner, payment of funeral and final expenses, the division of an estate into desired allocation among heirs, executing sophisticated tax strategies, performing business succession planning, implementing buy/sell agreements, etc. Please note that if your estate, including any proceeds from life insurance, is predicted to be above or close to the lifetime tax exemption (currently $3.5M), a more sophisticated analysis of your life insurance is needed than given in this article.
While death is not the most uplifting topic, a sound financial and estate plan can certainly make life feel more secure. In the next issue there will be a review of the process used to determine the amount of life insurance one should consider, probable beneficiaries, the practical length of a term life insurance policy and the most beneficial means to acquire a policy.
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Clint Edgington invites any questions or comments via email at C.Edgington@bhadvisory.com or via phone at 888.614.4625. Clint is the principal and co-founder of Beacon Hill Investment Advisory and is engaged in the practice of investment management and financial planning. Feel free to visit Beacon Hill’s web site at www.beaconhilladvisory.com.
-Update-
Recent increase in Federal Deposit Insurance Coverage (FDIC) is only temporary. Recently, the base insurance limit was raised from $100,000.00 to $250,000.00, but will return to the original $100,000.00 base insurance limit on January 1, 2010, unless the increase is extended past this date.
The Real Estate Settlement Procedures Act (RESPA) has been updated. RESPA, for the most part, directs the requirements of real estate closings. The new provisions mainly affect the disclosures required at a real estate closing, thus helping buyers make better decisions when borrowing for residential real estate purposes.
New homeowner notice required in Illinois foreclosure actions. Plaintiffs in a residential foreclosure action are required to attach a “Homeowner Notice” with a copy of the summons. The contents of the notice include rights of the homeowner, warnings of fraudulent practices and foreclosure workout options.
In Illinois, a mechanics lien complaint must be timely delivered. The Illinois Appellate Court ruled that failure to deliver a copy of a complaint within 90 days of giving notice of the lien is fatal to a lien action.
-Conclusion-
I hope this issue of The Estate has been helpful. In the event you have any questions or concerns, or would like to schedule a complimentary consultation, I am available by phone at 773.790.8058 or by e-mail at matthew@attorneymatthewquick.com. As a service to all current and prospective clients, I travel at no charge to all meetings and consultations throughout Michigan and Illinois. In addition, informational sessions regarding estate planning are provided free to groups of any size. Please let me know if there is any way I can help and feel free to contact me at any time.