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.
Letter of Intent
By Matthew A. Quick A Letter of Intent is a document prepared by a caretaker of a loved-one with special needs and details his or her past, present and future information. A Letter of Intent can give information and instructions on medical care, personal care, education, religion, recreation, general needs and preferences, and any other information detailing the daily life of a loved one with special needs. Even though a Letter of Intent is not a legal document, it may be the most important document involved in special needs planning because courts, future caregivers, estate and financial planners, and others can look to it for guidance in understanding a loved-one with special needs—through a Letter of Intent the present caregiver can continue to inform of the best possible care for a loved-one with special needs.
Supplemental Needs Trust
By Matthew A. Quick A Trust is a legal arrangement in which legal title of property is given to a person or entity (referred to as the “trustee”) to hold for the use and benefit of another person (referred to as a “beneficiary”). A Trust contains instructions that the trustee is bound to follow in safekeeping the trust property. There are three main reasons to employ the use of a Trust: it keeps the principal’s estate from having to endure the probate process; it may have significant tax-saving advantages by reducing the taxable portion of an estate; and it shelters property from people or entities such as creditors, loved-ones who cannot handle large amounts of money, and the government. A Supplemental Needs Trust is defined by the instruction to distribute the Trust property for the use and benefit of a loved-one with special needs, but only for permissible “extra” quality of life items and services not provided by government benefits. Put another way, distributions from a Supplemental Needs Trust will supplement the benefits provided by the government, but not jeopardize eligibility for such benefits.
A Supplemental Needs Trust may be created by a third-person or by the loved-one with special needs. In the event a Supplemental Needs Trust is properly created by a third-person and properly administrated, then a loved-one with special needs will remain eligible for government benefits and not be required to reimburse the government for the same. Furthermore, the third-person who created the Supplemental Needs Trust can direct the further distribution of the property of the Supplemental Needs Trust upon the death of the loved-one with special needs.
On the other hand, if a loved-one with special needs receives property outright, then his or her eligibility for government benefits would be in jeopardy. To remain eligible for government benefits, the special needs loved-one would have to create a Supplemental Needs Trust that, upon the death of the special needs loved-one, would be subject to the benefit payback requirements of federal law. There are two (2) Supplemental Needs Trust options for this situation: first, a Medicaid Payback Trust established pursuant to 42 USC 1396p(d)(4)(A) (also referred to as a “(d)(4)(A) Trust”); or, second, a Community Pooled Account Trust established pursuant to 42 USC 1396(d)(4)(C) (also referred to as a “(d)(4)(C) Trust;” these Trusts are collectively referred to as “OBRA 1993 Special Needs Trusts” because of the federal law, the Omnibus Budget Reconciliation Act of 1993, that established the use of these Trusts).
Do-Not-Resuscitate Orders (Illinois)
By Matthew A. Quick The Health Care Surrogate Act with regard to a Do-Not-Resuscitate Order (also known as a "DNR"), to wit, Chapter 755 of the Illinois Compiled Statutes, Act 40, Section 65, now only requires one witness to the signing of the Do-Not-Resuscitate Order instead of two witnesses; but requires the witness to attest that the person executing the Do-Not-Resuscitate Order had the opportunity to read the Do-Not-Resuscitate Order. These changes shall become effective January 1, 2010.
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).
Guaranties
By Matthew A. Quick A guaranty assumes liability for contractual obligations of another in the event the obligations are not performed. In many instances, the contractual obligations that a guaranty ensures include payment of funds, payment of fees and costs associated with collecting any funds and performance of tasks and duties. To specifically ascertain the liability of a guaranty, however, one must always look to the agreement between the guaranty and the party for whom the guaranty is ensuring action (pursuant to the Statute of Frauds, agreements to guarantee must be in writing to be effective). McCarthy Foundation v Winshall, 372 Mich 389 (1964); First National Bank of Ypsilanti v Redford Chevrolet Company, 270 Mich 116 (1935). After agreeing to guaranty an obligation, guaranties are bound until the obligation has been performed, unless the obligation is modified.
If the obligation is modified, guaranties are not immediately discharged. A guaranty's continuing liability depends on the type of guaranty it represents. Guaranties are categorized in two types: gratuitous and compensated. A gratuitous guaranty ensures contractual obligations without requiring compensation (e.g. a friend or family member) and a compensated guaranty only ensures contractual obligations if paid (e.g. an officer of a company; a bond or surety company). In the case of gratuitous guaranties, liability will not be extended to an obligation which varies from the one that was contemplated when the guaranty became bound. In other words, the risk of the guaranty will not be increased in any manner without the guaranty's consent, nor will the immediate protection of the guaranty be lessened in the event of default. Grinnell Realty Company v General Casualty & Surety Company, 253 Mich 16 (1931).
In the case of compensated guaranties, the rule is that they are not discharged unless the departure from the initial obligation of the parties is material and the guaranty is injured by the change in the contract. In re Landwehr's Estate, 286 Mich 698 (1938); Grinnell Realty Company v General Casualty & Surety Company, 253 Mich 16 (1931); Gunsul v American Surety Company of New York, 308 Ill 312 (1923).
In short, a compensated guaranty's bond is looked upon as one of insurance or indemnity instead of one of suretyship or guaranty. Grinnell Realty Company v General Casualty & Surety Company, 253 Mich 16 (1931).
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.
Child Born after Will (Illinois)
By Matthew A. Quick If a Will has been executed and a child is born thereafter, unless a provision is made in the Will for the child, or unless it appears by the Will that the child is to be disinherited, and the Will is not updated to include the child, the child is entitled to receive the portion of the estate to which he or she would be entitled if the person who executed the original Will (known as the “Testator” if male or “Testatrix” if female) died without a Will. In order to fulfill such a distribution, the gifts to all beneficiaries will proportionately reduce. 755 ILCS 5/4-10.
Alteration of a Will (Illinois)
By Matthew A. Quick An alteration of any part of a Will, which does not constitute a revocation, has no effect on the Will unless the person who executed the original Will (known as the “Testator” if male or “Testatrix” if female), or someone in the presence and at the direction of the Testator or Testatrix, re-executes the Will, abiding by all formalities. 755 ILCS 5/4-9.
Safekeeping Estate Planning Documents
By Matthew A. Quick Original estate planning documents are required, if not preferred, in every instance of use, which is why it is important the originals are kept safe, yet readily available. Since each estate planning document may be used at a different time and by different people, the recommended safekeeping of each document differs.
Safekeeping original Wills is exceptionally important. If an original Will is not produced for probate, a copy may be admitted. However, if a copy of a Will is contested during the probate proceeding, the proponent of the copy must prove the contents of the document are accurate and authentic. MCL 700.3407 (Illinois formal proof of Will statute: 755 ILCS 5/6-21. Also see In Re Estate of Koziol, 366 Ill App3d 171 (2006)). If the proponent of the copy is unable to do so, the copy will not be relied upon and probate will proceed as though the contents of the copy of the Will was revoked. Additionally, if the original Will is burned, torn or canceled, regardless of whether the burn, tear or cancellation touches any of the words on the Will, the Will is considered revoked. MCL 700.2507 (Illinois revocation statute: 755 ILCS 5/4-7). To address these issues, the original Will should be kept in a place safe from fire, water and all other elements, to avoid any unintended revocation. Once stored, the location of the original Will, and anything needed to access the location, should be provided to the personal representative and successor personal representative(s).
A few locations are suggested to store an original Will. A safe deposit box or home safe are common options; and Michigan provides the option of depositing the original Will with the Probate Court in the county in which the person who executed the original Will (known as the "Testator" if male or "Testatrix" if female) resides. MCL 700.2515. The process for a Michigan Testator or Testatrix to deposit an original Will involves taking the Will to the respective Probate Court (this can either be done by the Testator or Testatrix, or someone else at their direction) with a Twenty-Five ($25.00) Dollar filing fee. The original Will will be placed in an envelope that is dated and containing the name, address and social security number or driver's license number of the Testator or Testatrix. Upon deposit, a receipt will be given indicating the identifying information of the stored Will. During the lifetime of the Testator or Testatrix, the Will may be retrieved at any time with the receipt, but each time that Will, or another Will, is deposited, the Court will charge an additional Twenty-Five ($25.00) Dollar filing fee. A Will on file with the Court will remain with the Court until the death of the Testator or Testatrix, and will be released to the appropriate Court upon proof of death. Unfortunately, Illinois does not currently provide a Will depository service.
Original Trust Declarations, Powers of Attorney, HIPAA Waivers and any other estate planning documents that may need to be used immediately or require acceptance of their terms by the person nominated, should be kept by those appointed in each document, in the absence of certain, narrow circumstances. A copy of these documents should be provided to the entities that are to rely on them (i.e. Powers of Attorney for Health Care and HIPAA Waivers should be filed with health care providers; Powers of Attorney for Property should be on record with financial institutions). An additional copy of these documents should be kept by the Principal (the person who executed them) in a place that is confidential, yet readily available for quick reference and review.
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.
The Estate, Issue One
By Matthew A. Quick Introduction to Estate Planning
-Estate Planning-
Estate planning is a process that involves the construction of a strategy to direct one’s health care and property when he or she is not able to do so. The goal of an estate plan is to provide clear and detailed instructions to those who are appointed to help. These instructions are simply the wishes of the person whose estate is being planned (referred to as the “principal”). Some wishes are assumed, such as minimizing federal and state taxes and maximizing flexibility, but all directions of the estate plan are at the discretion of the principal.
Because the process of estate planning has fallen victim to the ill-fame of complexity, many people try to avoid an estate plan. However, complexity is not the burden of the principal. To the principal, the process of estate planning is as straightforward as creating a manual for the care of his or her health and property.
There are several mechanisms available to accomplish the wishes of the principal. Those that will be introduced in this article are Powers of Attorney, Living Wills, Medical Orders, Wills and Trusts.
For many principals, Powers of Attorney are the most important estate planning instrument available. Powers of Attorney come in two basic forms: Powers of Attorney for Health Care and Powers of Attorney for Property. A Power of Attorney for Health Care nominates a person, 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. It also gives the attorney-in-fact directions as to what should be done in the event the principal cannot direct his or her own medical treatment. The ability of the attorney-in-fact to act under a Power of Attorney for Health Care usually commences upon the 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.
If the attorney-in-fact needs to act for the principal, he or she must act pursuant to the directions of the Power of Attorney. These directions (referred to as “directives”) should be very detailed and thorough, and may give instructions on everything from religious requests to comfort care.
Alternatively, a Power of Attorney for Property appoints a person, an attorney-in-fact (referred to as an “Agent”), 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 could be given the ability to act for the principal even if the principal is not disabled or incapacitated. Much like a Power of Attorney for Health Care, however, if the attorney-in-fact needs to act for the principal, he or she must act pursuant to the principal’s directives. Again, these directives should be very detailed and thorough, and may give limited or general power to the attorney-in-fact to conduct the principal’s property and finances.
A Living Will is another means by which a principal can direct his or her health care. A Living Will does not grant decision making power to an attorney-in-fact, instead it is a list of directions for the attending medical practitioners. A Living Will allows the principal to specify the kind of treatment he or she would want in specific situations.
Medical Orders are reserved for patients that are terminally ill. Although there are several variations of Medical Orders, the most widely used is a Do Not Resuscitate Order (referred to as a “DNR”), which specifies that if the principal’s heart stops, or if the principal stops breathing, he or she is not to be given CPR. It is standard procedure for medical care facilities to attempt to resuscitate all patients if they experience heart failure or stop breathing; a DNR would relieve the medical care facility from this duty.
A Will is a legally-binding instrument that directs the principal’s property in the event of his or her death and appoints a legal representative to perform the principal’s wishes (referred to as a “Personal Representative” or “Executor”). A Will applies only to property that passes through the probate process. There are many interests in property that pass outside of the probate process, thus are not directed by a Will. Some examples of this type of property include, but are not limited to, jointly-owned property, property that is held in a trust and property with a named beneficiary, such as life insurance proceeds, individual retirement accounts or 401(k) plans. Regardless of how complex or simple the estate, a Will should always be included in an estate plan.
Finally, a Trust is a legal arrangement in which the principal gives legal title of property to a person or entity (referred to as the “trustee”) to hold for the benefit of another person (referred to as a “beneficiary”). A Trust contains instructions that the trustee is bound to follow in safekeeping the trust property. There are three main reasons to employ the use of a trust arrangement: first, a trust, for the most part, keeps the principal’s estate from having to endure the probate process; second, a trust can be used to shelter property from people or entities such as creditors, children who are too young to handle large amounts of money, and even the government; last, a trust can have significant tax-saving advantages by reducing the taxable portion of the principal’s estate.
Each of the estate planning mechanisms noted possesses great benefits to assist all of us in the estate planning process. The combined use of some, or all, of these tools provides for a dignified means to carry out the principal’s wishes.
-Update-
Beware of a recent real estate deed copying scheme. Companies such as National Deed Service, Inc., Illinois Deed Provider, Need A Deed, LLC., and California Record Retrieval are sending unsolicited letters that are alarming people and compelling them to order a copy of the deed to their home for up to $89.95 per copy. The letter does not tell people that the same copy of their deed costs no more than $5.00 if purchased from the county clerk’s office. Be apprehensive if you receive one of these letters; and instruct others to do the same. Save some money and, if you need a copy of your deed, consult your county clerk’s office.
The Illinois Appellate Court held that a living trust (referred to as a “revocable trust”) that is amended by a non-lawyer is invalid. Practically speaking, regardless of the wishes of the principal, a court will not accept as valid a trust tailored by a non-lawyer. In the wake of this decision, please contact an estate planning professional if your estate plan needs to be changed.
-Conclusion-
I hope this issue of The Estate has given you some insight into real estate and estate planning. 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, estate planning seminars are provided free to groups of any size. Please let me know if there is any way I can help.
Landlords and the Fair Debt Collection Practices Act
By Matthew A. Quick In light of the recent holding of the Appellate Court of Illinois in American Management Consultant, LLC, v Carter, it is strongly recommended that landlords comply with the tenets of the Fair Debt Collection Practices Act, 15 USC 1692, et seq, when attempting to collect back rent or any other past due obligation of a lessee.
The Fair Debt Collection Practices Act (also referred to as "FDCPA" or hereinafter as the "Act") was enacted to protect consumers from abusive collection practices by obligating debt collectors to comply with certain requirements when attempting to collect a debt. Debt collectors that fail to follow the requirements of the FDCPA, expose themselves to possible damages. Since landlords who are attempting to collect back rent, or any other past due obligation of a lessee, may be viewed as debt collectors, they too should comply with the requirements of the FDCPA to avoid any unnecessary liability.
For questions regarding specific requirements or provisions of the Fair Debt Collection Practices Act, please feel free to contact me; I am happy to help.