Commission says Real Estate Agents Should Not Negotiate MD Short Sales
According to guidelines recently published by the Maryland Real Estate Commission on July 22, 2013, real estate agents are acting outside the scope of their license when negotiating short sales with mortgage lenders. The Commission specifically stated that “since the scope of the real estate license is limited by definition to assisting clients in the purchase, sale or lease of real property, the Real Estate Commission and the Commissioner of Financial Regulation consider that negotiation of a short-sale deficiency agreement or any other type of mortgage collection forbearance with a seller’s mortgage lender or servicer falls outside of the scope of a real estate license.”
Agents may still market and list a house for short sale, but should not act as a representative of the seller in discussions between the seller and the lender, to fall within the protection of their license and E&O policy. Agents are now required to inform sellers that the seller must either personally negotiate with the lender or hire a Mortgage Assistance Relief Service Provider or a Maryland attorney (such as Suren G. Adams, Adams Law Office, LLC) to conduct the negotiations. The full guidelines can be found by clicking here: MD Real Estate Commission Short-Sale Guidelines.
There are numerous benefits of creating a trust as your primary estate planning tool. Different kinds of trusts can help you avoid probate, reduce estate taxes, or set up long-term property management for you and your family, including family members who are minors or have special needs.
A revocable living trust (“RLT”) is a separate entity created for holding title to property for the benefit of a beneficiary. A revocable living trust is just that – revocable and changeable by the person who created it. A “living trust” (also called an “inter vivos” trust) is simply a trust you create while you’re alive, rather than one that is created at your death.
With a revocable living trust, you, the property owner are the Settlor, who creates and can amend the trust, the original Trustee, who manages and distributes the property held in trust, and the beneficiary until death, at which time, a Successor Trustee transfers the property to the successor beneficiaries. Control over the property remains with the owner(s) during life and the transfer of property after death occurs without probate.
One of the primary advantages of creating a living trust is that property left through the trust does not have to go through probate. In a nutshell, probate is the court-supervised process of paying your debts and distributing your property to the people who inherit it. The average probate takes 7-12 months before distributions are made. Property you transfer into a living trust before your death does not go through probate. If you have property in more than one state, a trust can eliminate the need for probate proceedings in multiple jurisdictions. The successor trustee — the person you appoint to handle the trust after your death — simply transfers ownership to the beneficiaries you named in the trust according to how you stated in the trust agreement. In many cases, the whole process takes only a few weeks. When all of the property has been transferred to the beneficiaries, the living trust ceases to exist.
A simple probate-avoidance living trust has no effect on taxes. More complicated living trusts, however, can greatly reduce the federal and/or state estate tax bills for people who own assets above the estate tax exemption. If your estate, including life insurance, is sizable and over the estate tax exemption amount ($3,000,000 for the Maryland estate tax and $5,490,000 for the 2017 federal estate tax), a credit shelter trust can save your beneficiaries tens of thousands of dollars in estate taxes. This specific tax-saving trust is designed primarily for married couples. It is also commonly called an “AB trust,” an “exemption trust,” a “marital life estate trust,” or a “marital bypass trust.” Each spouse leaves property, in trust, to the other for life, and then to the children or other beneficiaries.
Another benefit of a trust is that it is a private document. A will becomes a matter of public record when it is submitted to a probate court, as do all the other documents associated with probate — inventories of the deceased person’s assets and debts, for example. The terms of a living trust, however, need not be made public.
Some other benefits of trusts are that a trust can allow for great specificity with regard to distributions for beneficiaries, asset protection, retirement plan distribution planning to limit income taxes, provisions for special needs children, blended family planning, and provisions to prevent guardianship.
Why Everyone Needs an Estate Plan
The primary reason that everyone needs an estate plan is that if you fail to create a plan, the State will create one for you. The State legislature does not know anything about your family dynamics and the things that you value, so why leave such important decisions to them? If you are a parent, you should be the person deciding who will take care of your children if something happens to you? You should also be the person to decide who gets your assets after you are gone and to decide when and how they should be distributed?
Without a will, state laws of “intestate succession” kick in. In Maryland*, the following distributions would apply if you died without a will:
- If survived by spouse and parents:
- ½ of estate, plus $15,000 to spouse
- Balance to parents
- If survived by spouse and children:
- ½ of estate to spouse; ½ to children
- If survived by spouse and adult children:
- ½ of estate, plus $15,000 to spouse
- ½ of estate to children (not including step- children)
- If no living heirs or step-children:
- Estate goes to the Board of Education
If the intestate laws do not precisely reflect your wishes, a will and/or a revocable living trust is necessary.
*See MD Code Ann., Estates and Trusts §§ 3–101 et seq. (2003) for a complete description of intestate distributions.
Another reason that everyone needs an estate plan is that a well planned estate is a valuable gift to your loved ones at a time when they will be least able to make important decisions. If you have ever had to suffer through the loss of a loved one, this is all too true for you. Your family should be able to focus on honoring your memory rather than figuring out how to pay bills when the bank will no longer allow access to accounts, or deciding who gets what assets.
A well planned estate also has the following benefits:
- Designate guardian(s) for your children
- Minimize time and complication of probate
- Potential to reduce taxes and fees
- Avoid court appointed guardianship
- Express your wishes regarding life support, etc.
- You decide the distribution of your property, rather than the government
Rebuilding your credit post- bankruptcy discharge
I have been getting more and more calls from my former bankruptcy clients, who have been working hard on rebuilding their credit and savings post- bankruptcy discharge, asking when they can qualify to buy a home. The answer used to be 2-4 years, but there are several mortgage companies out there who have been opening up financing for post-bankruptcy clients to as soon as 1 day after discharge (see https://www.peoplesbankmtg.com/mortgage-after-bankruptcy/).
There are specific strategies you can use to rebuild your credit score and if you actively save the money that you had been spending on debt prior to your bankruptcy, you can be in an even better position to get a good rate when financing the purchase of your home. Let us know your situation and we can connect you with the best strategy for taking advantage of the fresh start you received from your bankruptcy discharge.
Should Christians File for Bankruptcy?
Should Christians file for Bankruptcy? As a Christian, I had to wrestle with this issue before deciding to take on my very first bankruptcy case back in 2004. I prayed and researched this issue and found the What the Bible has to say about Bankruptcyfollowing scripture:
Deuteronomy 15: 1-6. The Year for Canceling Debts.
At the end of every seven years, you must cancel debts. This is how it is to be done: Every creditor shall cancel the loan he has made to his fellow Israelite. He shall not require payment from his fellow Israelite or brother because the Lord’s time for canceling debts has been proclaimed. You may require payment from a foreigner, but you must cancel any debt your brother owes you. However, there should be no poor among you, for in the land the Lord your God is giving you to possess as your inheritance, he will richly bless you, if only you fully obey the Lord your God and are careful to follow all these commands I am giving you today. For the Lord, your God will bless you as he has promised, and you will lend to many nations but will borrow from none. You will rule over many nations but none will rule over you.
New International Version.
Similar to many of our laws in the U.S., the Bankruptcy Code parallels Biblical instructions with directions for canceling indebtedness. Prior to the changes in the Bankruptcy Code in 2005, you could receive a Chapter 7 discharge of indebtedness every 7 years. That has since been changed to every 8 years, but the underlying principle of debt forgiveness remains.
It is clear that God never intended His people to live under the stress and hopelessness of crushing debts. Obviously, He didn’t intend for this principal to be abused by racking up debts that you never intend to repay, but it contrary to His Word to believe that bankruptcy is wrong. In His mercy, it was provided as a blessing for His people so that they could receive a fresh start. We should not just embrace the parts of His Word that talk about the abundance He wants us to have, but rather we should embrace His whole Word including those passages that provide for hard times and His way out of them.
Understanding Probate and How to Avoid It - Part 2
In part one of this series, we explored the probate process and its potential drawbacks for your family. Now, in part two, we'll delve deeper into the ways you can help your loved ones avoid probate with wise planning.
The Challenges of Probate for Your Family
Probate can be a lengthy process, burdening your loved ones during a difficult time. The costs, both in terms of time and emotional strain, can be significant. Additionally, there are several potential consequences your family might face if you don't plan ahead. Immediate access to your assets can become a challenge, leading to financial hardship. Your family may need to hire a lawyer, leading to attorney fees, with the risk of choosing an unresponsive attorney. Court costs, executor's compensation, and other administrative expenses can further deplete your estate. Probate is also a public process, exposing your estate's details and making your beneficiaries potential targets for scams. Furthermore, family conflict can arise, especially in cases of unequal distribution or contested wills.
Assets That Don't Require Probate
Not all assets need to go through probate, even without an estate plan. Assets with beneficiary designations, such as retirement accounts, IRAs, 401(k)s, life insurance, payable-on-death (POD) bank accounts, and transfer-on-death (TOD) property (bonds, stocks, vehicles, real estate), pass directly to designated beneficiaries without probate. Assets with the right of survivorship, like joint tenancy, tenancy by the entirety, and community property with the right of survivorship, also bypass probate, but it's essential to ensure proper beneficiary designations are in place.
Revocable Living Trust
One of the most effective tools for avoiding probate is a revocable living trust. This trust is a legal agreement between the grantor (you) and the trustee (you, during your lifetime) to hold assets for the benefit of the beneficiary (also you during your lifetime). In the event of your death or incapacity, a successor trustee takes over the management of the trust, allowing assets to be transferred without court intervention. A revocable living trust offers control over asset distribution, can include specific instructions, and protects assets from creditors, lawsuits, and divorce.
Key Benefits of a Living Trust
A revocable living trust, when properly set up and funded, allows your loved ones to inherit assets without going to court. The trust offers greater control over distribution, allowing you to stipulate conditions or life events for distribution. Assets held in the trust are protected from beneficiaries' creditors, lawsuits, and divorce. The process remains private and is not part of the public record, ensuring privacy for your family during asset transfer.
Transferring Assets into a Living Trust
To ensure the proper functioning of a trust, assets must be titled in the trust's name, a process known as "funding" the trust. Proper funding is crucial to avoid assets going through probate. It's essential to work with a Estate Planning Lawyer to ensure your trust is correctly funded, and your asset inventory stays updated over time.
Life & Legacy Planning
Every family's circumstances are unique, and a living trust might be the ideal solution for some, but not all. The best way to determine the right estate planning strategies is to consult with an Estate Planning Lawyer for a Legacy Planning Session. This session will analyze your assets, priorities, and the well-being of your loved ones in the event of your passing or incapacity. Our Legacy Planning Process empowers you to make informed decisions that align with your family's needs, dynamics, and budget. Contact us today to start planning to leave behind a legacy instead of a mess.
Understanding Probate and How to Avoid It - Part 1
Without a comprehensive estate plan, your assets may be subjected to probate, a court process that can be time-consuming, expensive, and public. Avoiding probate is a key goal of most estate plans, aimed at keeping your family out of court. In this two-part series, we'll delve into the probate process, its requirements, and explore strategies to help your loved ones avoid it through wise planning.
Probate is required for individuals with no estate plan, those with only a will, or when a will is deemed invalid. Even with a will, probate is inevitable upon your passing. To prevent your family from facing probate and potential conflict, it's essential to go beyond just having a will and utilize additional estate planning methods.
Dying without a will results in intestacy, where probate is needed to settle debts and distribute assets based on state laws. Priority typically goes to spouses, children, parents, siblings, and more distant relatives, with assets going to the state if no living heirs are found. Some states offer simplified probate for estates with a low value.
How Probate Works
Authenticating the Validity of Your Will
Your executor files the will and death certificate, initiating probate. The court authenticates the will, ensuring it complies with state law. Beneficiaries and potential heirs are notified and can contest the will's validity.
Appointing the Executor or Administrator
The court formally appoints the executor named in the will or selects a personal representative for intestate cases. A bond might be required for the executor, acting as insurance for potential errors during probate.
Locating & Valuing Your Assets
The executor identifies and appraises all assets, including those not listed in estate planning documents. A comprehensive asset inventory is crucial to prevent assets from being lost.
Notifying & Paying Your Creditors:
Creditors are notified, and valid claims are paid from the estate funds. A limited period is given for creditors to make claims, which the executor can challenge.
Filing & Paying Your Taxes
The executor handles outstanding taxes, including income, capital gains, and estate taxes, if applicable. Most families won't face estate taxes due to high exemption thresholds.
Distribution of Your Remaining Assets
After debts and taxes are paid, the executor petitions the court to distribute assets to beneficiaries according to the will or intestate laws. Once completed, a petition is filed to formally close probate.
Probate can burden your family with unnecessary time, expenses, and publicity. Proactive estate planning can spare your loved ones from this process. In the next part of this series, we'll explore strategies to avoid probate and keep your family out of court. Consider working with us, your Estate Planning Lawyer, for a Legacy Planning Session to create a comprehensive estate plan tailored to your needs. You can schedule an appointment with us today to get your affairs in order.
Next week, in part two, we’ll discuss the estate planning strategies that you can use to avoid the need for your loved ones to go through probate.
Estate Planning 101: Wills vs. Trusts
Wills and trusts are fundamental components of estate planning, serving as legal tools to distribute your assets among your loved ones after your passing. However, these two documents work differently in various aspects.
When They Become Effective
When they take effect, wills become effective only upon your death, while trusts take effect immediately after signing and transferring assets to the trust (also known as "funding" the trust). A will designates asset distribution after death, whereas a trust specifies how assets are managed and distributed both before and after death, including in cases of incapacity.
An important distinction is that a will solely governs assets owned in your name, excluding joint tenancy properties and assets with beneficiary designations like life insurance policies, IRAs, and 401(k)s. On the other hand, a trust covers assets that have been transferred to the trust or where the trust is designated as the beneficiary. It is crucial to work with an Estate Planning Lawyer to ensure proper funding of the trust.
To learn more about Probate, and why it is important to get a trust in order to avoid probate. Check out our Vlog, where we explain what probate is, and what it entails.
Administration differs significantly between wills and trusts. Wills on their own require probate, a court-supervised process to ensure asset distribution aligns with your wishes. Probate can be lengthy, costly, and may result in disputes among family members. Conversely, trusts bypass probate, saving time, money, and potential conflicts, while also maintaining privacy.
Regarding costs, will-based estate plans are generally less expensive upfront compared to trust-based plans. However, probate costs for wills can be high, making trusts potentially more cost-effective in the long run. The best approach varies for each family, considering individual circumstances, assets, and preferences.
What is Best for You
To determine the most suitable solution for your family, consult an Estate Planning Lawyer for a Legacy Planning Session. This comprehensive process will help you select the right planning tools at the appropriate fees, tailored to your needs and your loved ones' welfare.
Take advantage of our Legacy Planning Process, where we analyze your assets and priorities to devise a personalized estate plan. By meeting with your Estate Planning Lawyer, you'll gain full confidence in your chosen estate planning approach, considering your unique situation, family dynamics, and budget. Schedule an appointment today to get started.
4 Reasons Estate Planning is so Essential for Business Owners – Part 4
#4 | The Perils of Appointing a Family Member to Run Your Business Without a Detailed Succession Plan
If you appoint a family member to take over your business after your passing without providing them a detailed plan, a few poor decisions can lead to the ruin of your company. Countless stories abound of family members inheriting multi-million-dollar businesses and mismanaging them, resulting in rapid decline. Even smaller operations like yours are at risk of suffering a similar fate.
Besides the risk of total destruction, your successor's radically different management style can cause conflicts among your staff, clients, and family. Simply naming a successor is insufficient to ensure the business's stability and prosperity.
Estate Planning Solution
An estate planning solution in the form of a comprehensive business succession plan can safeguard your company's future. Beyond designating a successor, such plans establish detailed instructions for running the business. They cover ownership transfer, compensation and promotions rules, and dispute resolution procedures, providing a roadmap for continued success after your passing or retirement.
To complete your estate plan and secure your business, our Legacy Planning Process, led by your Estate Planning Lawyer, will create a thorough estate plan. This plan guarantees that the business and wealth you worked hard to build will not only survive but thrive, regardless of what the future holds.
Moreover, our estate plans encompass legacy planning services, allowing you to preserve and communicate your most cherished values, stories, and mementos to your loved ones. Working with us ensures that your business and legacy will offer maximum benefits to those you hold dear.
Our approach to estate planning goes beyond preparing for death and distributing your assets; it is about planning for a life filled with what you love and leaving behind a meaningful legacy through the choices you make today. This comprehensive service is why we call it Legacy Planning. Initiate the process today by scheduling a Legacy Planning Session.
4 Reasons Estate Planning is so Essential for Business Owners – Part 3
#3 |Navigating the Impact of a Business Partner's Passing: Managing Ownership Changes and Financial Obligations
If you're in a business partnership, having a solid plan in place is essential to handle unforeseen events like departures, deaths, divorces, or incapacitations of any co-owner. Without a legally binding strategy and sufficient funds to execute it, your business could face potential conflicts and complications.
Imagine your business partner passes away without a plan, and their children inherit their ownership share in your business. Suddenly, you might find yourself in business with your partner's kids or forced to pay an inflated price for their share. A similar predicament could arise if your partner gets divorced, and their former spouse is granted a portion of the company in the divorce settlement.
Estate Planning Solution
The solution lies in a well-crafted buy-sell agreement. This agreement clearly outlines what happens in case an owner departs due to various reasons, including death, incapacity, or divorce.
For instance, a buy-sell agreement can ensure that in the event of specific triggers like retirement, death, or permanent incapacity, the remaining owners have the option to purchase the departing partner's share of the business. This not only prevents unexpected new partners but also safeguards your loved ones from being stuck with an unwanted and unsellable business.
However, a buy-sell agreement alone is not enough; you also need a reliable source of funding for the surviving owners to buy out the shares of a deceased partner. Life insurance is often the ideal solution. Each owner can be covered by a life insurance policy, and upon the unfortunate event of an owner's passing, the company receives the death benefit to buy out the deceased owner's share and/or compensate their heirs.
By implementing a comprehensive buy-sell agreement and securing adequate life insurance, you can protect the future of your business and avoid potential challenges that could otherwise arise.